Lok’nStore Group plc
Annual Report
and Accounts
for the year ended 31 July 2022
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Overview
02 Highlights
04 Chairman’s Statement
10 Group at a Glance
Strategic Report
14 The UK Self-Storage Market
16 Our Business Model
18 Our Strategy
19 Managing Director’s Review
24 Key Performance Indicators
26 Property Review
30 Financial Review
39 Section 172 Statement
40
Principal Risks and Uncertainties
Environmental and Social Report
46 Environmental Matters
50 Social Matters
Governance
54 Board of Directors and Advisers
56 Corporate Governance
63 Directors’ Report
64 Remuneration Report
68
Statement of Directors’
Responsibilities
Independent Auditor’s Report
to the Members of Lok’nStore
Group plc
69
Financial Statements
76
78
79
77
Consolidated Statement
of Comprehensive Income
Consolidated Statement
of Changes in Equity
Company Statement
of Changes in Equity
Consolidated and Company
Statements of Financial Position
Consolidated Statement
of Cash Flows
81 Accounting Policies
91
123 Glossary
124 Our Store Locations
80
Notes to the Financial Statements
Lok’nStore Group plc Annual Report and Accounts 2022
Dynamic new store
opening schedule
driving future growth.
We are a leading Company in the
fast-growing UK self-storage market.
We opened our first self-storage
centre in February 1995 and have
grown consistently over the last
27 years with 40 self-storage centres
operating across England and Wales.
We have been listed on the AIM
market since June 2000.
We operate our own stores and
manage stores for third party owners.
Storage services are available to both
household and business customers
at our highly branded Lok’nStore
centres.
To find out more visit:
www.loknstore.co.uk/investors
01
Strategic ReportEnvironmental and SocialOverviewGovernanceFinancial Statements Highlights
Lok’nStore, the fast-growing AIM listed self-storage
company, is pleased to announce its Preliminary
Results for the year ended 31 July 2022.
GROUP REVENUE
£26.9m
£21.9m
ADJUSTED TOTAL ASSETS4*
£370.9m
£294.8m
up 22.9%
GROUP ADJUSTED
EBITDA1*
up 37.5%
OPERATING PROFIT2*
(Before non-underlying items)
up 49.8%
21
22
£16.4m
£11.9m
21 22
£11.4m
£7.6m
21 22
up 25.8%
ADJUSTED NET ASSET
VALUE5* PER SHARE
up 33.0%
ANNUAL DIVIDEND
PER SHARE
up 15.0%
21
22
£9.72
£7.31
21 22
17.25p
15.0p
21 22
“ Lok’nStore’s business has moved ahead significantly with revenue up 22.9% and EBITDA up
37.5% on last year. Demand for UK self-storage assets remains strong, and this has driven our
Net Asset Value per share up by 33% to £9.72. Trading since the year-end has been good.
We are on site at four new Landmark stores which will open within the next 12 months and can be
completed using cash on hand. At 31 July 2022, our secured pipeline of ten new sites increases
owned space by 44.1%. This pipeline of new stores will add further momentum to sales and
earnings growth. We have reduced our net debt to £20.3 million and our business model enables
us to build out the pipeline as market circumstances dictate.
We aim to build more Landmark stores in the under-supplied UK market. We are growing the
business from a strong financial platform that gives us great flexibility to respond to market
circumstances. We have multiple levers to allocate our capital in ways which are most accretive
to our shareholders through the economic cycle, and we are confident that we will continue to
increase net assets, cash flows and dividends.”
Andrew Jacobs
Executive Chairman
02
Lok’nStore Group plc Annual Report and Accounts 2022 Record
REVENUE
AND PROFITS
Significant
increase
IN NET ASSET VALUE
Dynamic
Pipeline
DRIVING FUTURE GROWTH
STRONG REVENUE AND PROFIT GROWTH
• Group Revenue £26.9 million up 22.9%
DISCIPLINED USE OF CAPITAL LEADS TO
STRONG BALANCE SHEET AND LOW DEBT
(2021: £21.9 million)
• Group Adjusted EBITDA1* £16.4 million up
37.5% (2021: £11.9 million)
• Operating Profit before non-underlying items2*
£11.4 million up 49.8% (2021: £7.6 million)
• Operating Profit after non-underlying items
£17.2 million up 130.0% (2021: £7.5 million)
DRIVEN BY SOLID OPERATING METRICS
• Achieved rate on occupied space up 13%
to £25.6 per sq. ft (2021: £22.7 per sq. ft)
• Sale and manage back of four stores at a
22.8% premium to 31 July 2021 valuations
delivering £37.9 million of net sale proceeds
in cash
• £46.5 million cash at year-end (2021: £9.1 million)
• Net debt (excluding lease liabilities and
deferred finance costs) reduced to £20.3 million
(2021: £56.3 million)
• Loan to value ratio6* down to 6.6% (2021: 21.0%)
• £25 million accordion executed – increases
bank facility to £100 million
• Managed store revenue £2.8 million up 107%
• Bank facility extended by one year to April 2026
• Cost Ratio13* reduced to 38.5% (2021: 44.9%)
CASH FLOW GROWTH DRIVES ELEVENTH
CONSECUTIVE YEAR OF DIVIDEND
INCREASE
• Cash Available for Distribution (CAD)3* per share
up 36.6% to 38.7 pence (2021: 28.4 pence)
• Annual dividend increased by 2.25 pence to
17.25 pence per share up 15% (2021: 15 pence
per share) – covered 2.24 times by CAD
SIGNIFICANT INCREASE
IN NET ASSET VALUE
• Adjusted Net Asset Value5* per share up 33%
to £9.72 per share (2021: £7.31 per share)
DYNAMIC PIPELINE8* OF NEW LANDMARK
STORES WILL DELIVER FURTHER GROWTH
• 4 new stores currently on site will add over
218,000 sq. ft. of new trading space
• Secured store pipeline9* total of 10 sites will
add 44.1% to owned new space over the
coming years
WELL POSITIONED FOR THE FUTURE
• New store openings and rate increases will
lead to further revenue and profit growth
• Trading momentum continues post year end
with same-store revenue up 13.6% for August
and September 2022 compared to the same
period last year
• Strategy unchanged – increase revenue
from existing stores and open more new
Landmark stores
• Flexibility to respond to market circumstances
*
For all of the definitions of the terms used in the highlights above refer to our Key Performance Indicators on pages 24 and 25.
03
Strategic ReportEnvironmental and SocialOverviewGovernanceFinancial Statements Chairman’s Statement
“ Increased Asset values reflect
strong trading and investor interest
in self-storage.”
Andrew Jacobs
Executive Chairman
I am delighted to be reporting
another year of great results
for Lok’nStore, delivering a
strong operating and financial
performance. We have seen
significant growth in revenue,
profits, and asset values, enabling
the Group to increase the dividend.
These excellent results can be
summarised as:
• 22.9% increase in Group Revenue
• 37.5% growth in Group Adjusted
EBITDA
• Sale and manage back of four
stores at a 22.8% premium
to July 2021 valuations
• Low debt and LTV
• 33% increase in Adjusted Net
Asset Value per share
• Dynamic new store opening
schedule
•
Increase of 15% in annual dividend
• Operational GHG emissions
down 92.5% since 2005
These results demonstrate
Lok’nStore’s delivery of our
commitment to deliver sustainable
growth through all stages of the
economic cycle. Continued investor
interest in the UK self-storage sector
demonstrated by market transactions
underpins the increased value of our
assets and our strategy to open more
Landmark stores.
The detail behind these results
is discussed further in our
Financial Review.
Significant Increase
in Net Asset Value
Adjusted Total Group Assets4* have
moved upwards sharply in the year
by 27.3% to £375.2 million mainly
due to the trading strength of our
business, as well as investor interest
in self-storage assets and our
investment in new stores.
Our trading assets are independently
valued by Jones Lang La Salle
(JLL) on 31 July each year and this
year produced a total valuation of
£279.0 million (2021: £234.9 million),
an uplift in the value of our freehold
and leasehold trading stores of
£44.1 million. £30 million of this uplift
comes from the maiden valuations
of our new stores in Warrington
and Stevenage.
The Same Store uplift in the value of
our freehold and leasehold trading
stores (adjusting for the disposal of
the four trading stores and the new
stores in Warrington and Stevenage)
is £45.9 million.
£15.5 million of the same store uplift
comes from the impact of improved
cash flows of the same store portfolio
that was valued last year.
This demonstrates the impact
operating performance has on
asset values and why one of our
key objectives remains to fill existing
stores and continue improving pricing.
The balance of the same-store
uplift of £30.4 million comes from
improvements in the Discount
Rate and Exit Yield applied to the
valuations. On our owned freehold
trading stores we have seen exit
yields improving on average by 68
basis points, with discount rates
improving by 116 basis points. This
demonstrates that the UK self-storage
Market is attracting significant interest
from institutional investors.
The Exit Yield and Discount Rates
applied in the valuations are validated
by transactional evidence. We are
well positioned to benefit from
future changes with our high-quality
portfolio of stores, and Landmark
store development pipeline. As
we enter a new interest rate cycle,
rising yields and discount rates may
reduce the value of the stores, but
we expect any reductions will soon
be offset by new store openings and
the continued revenue growth of the
business.
More details on the valuation of our
trading stores can be found in the
Property Review on page 26 and in
note 12(a) of the financial statements
on page 97.
04
Lok’nStore Group plc Annual Report and Accounts 2022 ANNUAL DIVIDEND 17.25 PENCE PER SHARE UP 15%
£12.2m
INVESTED IN NEW
STORES THIS YEAR
33%
INCREASE IN NET
ASSET VALUE PER
SHARE TO £9.72
Further Dividend Growth
The Directors are proposing a final
dividend of 12.25 pence per share
(2021: 10.67 pence) following the
interim dividend payment of 5.0
pence per share in June 2022,
bringing the total distribution for the
year to 17.25 pence per share, an
increase of 2.25 pence per share
up 15% (2021: 15 pence per share)
and our eleventh year of increase in
a row.
As announced last year, the Board
has reviewed the Company’s dividend
policy in the context of its disciplined
approach to capital allocation.
Considering the cash-generative
qualities of the business and noting
the requirement to invest in the
Landmark store opening programme,
Lok’nStore will pursue a progressive
dividend policy which reflects the
strong long-term underlying cash
flow growth of the business.
Subject to approval at the Company’s
AGM on 8 December 2022 the final
dividend will be paid on 6 January
2023 to shareholders on the register
on 25 November 2022. The ex-
dividend date will be 24 November
2022. The final deadline for Dividend
Reinvestment Election by investors
is 9 December 2022.
*
See our Key Performance Indicators on
pages 24 and 25.
Sale and Manage-Back
of Four Stores
On 31 January 2022, the Group
completed the Sale and Manage-
Back of four stores for a total gross
consideration of £39.0 million
representing a 22.8% uplift on the
independent external valuation
of the stores at 31 July 2021.
Sale and manage-back of stores,
when appropriate, demonstrate how
the Group can manage its cash
generation and control its debt. At
the same time, we can increase the
quality of our portfolio by investing in
new more environmentally efficient
Landmark stores.
This transaction was immediately
accretive to Group net asset value
and has provided net sales proceeds
of c.£37.9 million for reinvestment
into new, faster growing Landmark
stores. Further detail is set out in the
Financial Review.
Due to the sale of four trading stores
half-way through the financial year
and the opening of two new stores
it has been necessary this year to
provide some ‘Same Store Analysis’.
This quantifies the improvement in the
core business in the year unrelated to
the opening of new stores, and more
particularly in this financial year, the
sale and manage-back of previously
owned stores. The same store
analysis is set out in the Managing
Director’s Review on page 19.
Investment in New Stores
This year we invested £12.2 million
in new store development.
Following the receipt of £37.9 million
from the Sale and Manage-Back
transaction reported above we can
report a year-end LTV ratio (net of
cash) of only 6.6% (2021: 21.0%)
and a very low level of net debt
of only £20.3 million, down from
£56.3 million in the previous year
(Refer to note 29b).
During the year we opened two new
owned stores in Warrington and
Stevenage. Early trading in these two
stores has been excellent. Trading at
our new stores continues to exceed
expectations and this underpins
our confidence that our pipeline will
add further to sales and earnings
growth. The Group continues to find
high-quality sites for new Landmark
stores. The current secured pipeline
adds 44.1% more trading space to
our total owned portfolio.
We are on site at four Stores, in
Basildon, Bedford, Staines and
Peterborough which will all open
in 2023. This will mean increased
capital expenditure in the coming
twelve months. We are also due to
go on site shortly at Kettering on
behalf of a third-party Managed
Store client.
05
Strategic ReportEnvironmental and SocialOverviewGovernanceFinancial Statements Chairman’s Statement continued
Capital Expenditure
It is generally our intention to
commence the construction and fit
out of all our pipeline stores as soon
as all planning and enabling works
have been completed.
Because our own pricing achieved
increased at 13% over the past
year, we are not seeing input costs
increase at such a level that would
impact the viability of the projects
we have currently under review.
Self-storage benefits from the
short lead time between breaking
ground and store opening of only
around twelve months. We have only
committed future capital expenditure
at the four stores where we are on
site all of which will be open and
producing cash within the next 18
months. We have a high degree of
flexibility regarding start dates for
further building at other sites. We
can therefore adapt our development
programme quickly to react to
changing economic circumstances.
We are seeing material cost inflation
in building costs which we continue
to monitor closely, particularly
for future buildouts as the four
developments currently on site
are on fixed cost contracts.
We report more generally on
operating/trading costs in the
Financial Review on page 30.
Planning permissions
The planning process remains
challenging. The system is complex,
successful outcomes can take
considerable time to achieve, and
the process consumes a significant
amount of management time.
Despite its challenges, during
the year we secured planning
consents on the Kettering and
Peterborough sites.
Managed Stores
Our strategy to grow the number
of stores we manage for third party
owners, enables the Group to earn
revenue without having to commit
capital, to amortise fixed central
costs over a wider operating base
and drive further traffic to our website
which benefits our entire operation.
We had a particularly good year with
managed stores generating managed
store income of £2.79 million, up
107% from the previous year (2021:
£1.35 million). In the management
fees table on page 22 we separate
recurring management fees from
non-recurring fees. Recurring
management fees increased by
49% in the year with non-recurring
fees (planning, store opening and
supplementary fees) increasing by
a spectacular 217%.
Lok’nStore manages 16 trading
stores for third-party owners with
a property value approaching £150
million. Our current pipeline includes
an additional managed store which
will take the total number of managed
stores to 17.
06
Lok’nStore Group plc Annual Report and Accounts 2022 Our People
We always rely on our amazing
people to deliver these impressive
results. I am delighted to say that all
of our colleagues continue to benefit
from the success of the business
with significant bonuses paid to all
staff members.
We will continue to invest in training
to develop and deepen the skills of
our team members and create internal
succession as the business continues
to expand. To support our colleagues
with the rising cost of living we
brought forward annual pay reviews
of our store teams and ensured all
colleagues in the business received
an annual salary review. We continue
to keep salary levels under review
to ensure that all of our employees
are paid fairly, and we continue to
promote equity ownership to our
colleagues via our Share Investment
Plan and the granting of options.
Board Changes
At the Company Annual General
Meeting in December 2021, Edward
Luker retired from the board. I would
like to personally thank Edward for
his support, wisdom and challenge
over many years.
Jeff Woyda joined the board as a
Non-Executive Director in September
2021 and has now replaced Edward
Luker as Senior Non-Executive
Director. Jeff also now chairs the
Remuneration Committee and is a
member of the Audit Committee.
Liquidity and Cash Flow
At 31 July 2022, the Group had cash
balances of £46.5 million, a significant
increase on last year’s £9.1 million
following the sale-and-manage-back
of four stores and strong operating
cash generation. The Group has
a £100 million five-year revolving
credit facility which together with
cash provides all the financing needs
for the current secured pipeline.
Following the execution of a one-year
extension the facility now runs until
April 2026. The Group is not obliged
to make any repayments on its
loan facility prior to its expiration
in April 2026.
Cash inflow from operating activities
before investing and financing
activities was £18.6 million in the
year to 31 July 2022 up 52.4%
(2021: £12.2 million).
Debt and Bank Covenants
The average cost of bank debt on
drawn facilities for the year was
1.71% (2021: 1.54%). All of the
Group’s total drawn bank debt of
£66.8 million (2021: £65.4 million) is
unhedged. At the date of this Report
the Group’s current cost of debt
is running at 3.72% as rates have
moved higher since the year-end.
At the year-end interest cover was
ten times tested on a 12-month
rolling basis, against a covenant of
2.5 times. At the year-end our loan-
to-value ratio based on net bank debt
was 6.6% versus a bank covenant
of 60% providing a large cushion of
comfort. Both the LTV and Interest
covenants exclude the gearing
effects of IFRS 16 as agreed with
our banks.
Environmental, Social
and Governance
We are working hard to create an
environmentally sustainable business
for all our customers, our colleagues,
local communities and the wider
environment. Lok’nStore have been
reporting on ESG factors since
2005 and was the first listed UK
self-storage company to do so.
Since then, we have been continually
active and our operational GHG
emissions are 96.5% lower than if
we had taken no action since 2005.
In recent years, the Lok’nStore
Environmental committee, consisting
of colleagues in various roles across
the business and including three
Board members have been focused
on practical improvements we can
make to our environmental footprint.
Details of our environmental
performance along with our
commitments and targets can be
found in our Environmental and
Social report from page 45.
Our business model provides
strength and adapts quickly
in an uncertain world
Looking forward during this period
of economic and market uncertainty,
it is worth emphasising Lok’nStore’s
robust business model.
We operate with a high EBITDA
margin, sheltering the business from
cost increases. Debt and leverage
are low, and we have considerable
cash on hand. Importantly the
Company can pause capital
expenditure quickly if market
conditions dictate and the ongoing
business requires little maintenance
capital expenditure. At the year-end,
we are onsite at four stores where
the capex required to complete these
projects is £22.3 million, compared
to the £46.5 million of cash on hand.
The Company has 17,000 customers
who come from a diverse social
and economic background and
whose reasons for storing are widely
diverse. Customers pay on a rolling
four weekly up front basis. As a
result, bad debt continues to be low
at 0.21% of revenue. Each customer
is relatively small with no self-storage
customer accounting for more than
0.3% of revenue. Additionally, the
UK self-storage market remains
under-supplied, and demand
remains strong.
07
Strategic ReportEnvironmental and SocialOverviewGovernanceFinancial Statements Chairman’s Statement continued
Lok’nStore continues to experience
strong year to year revenue growth
on a same store basis and this will
be enhanced by the three stores
opened this year and the opening
of four new stores opening over the
coming year. Our new secured store
pipeline of new stores will add 44.1%
more owned trading space over
coming years. Over the medium to
long term these factors will continue
to increase revenue, profits and asset
value substantially. This strength
enables Lok’nStore to confidently look
through the current external market
turbulence.
We have an exciting period of growth
ahead. With Lok’nStore’s resilient and
flexible business model enabling the
business to manage its conservative
debt structure the Board is confident
the Group will continue to thrive.
Andrew Jacobs
Executive Chairman
28 October 2022
We are experiencing some cost
increases in the short term, but these
are largely or wholly balanced by our
ability to increase our own achieved
rate. We have also taken steps to
mitigate the energy cost increases,
for instance we now use 88% of the
electricity generated in stores that
have PV installed.
Our Objectives
Our objectives remain to:
• Steadily increase cash available
for distribution (CAD) per share
enabling a predictable growth
of the dividend
• Fill existing stores and improve
achieved rates
• Develop our secured pipeline of
sites into new Landmark stores
• Acquire more sites and build
more new Landmark stores
•
Increase the number of stores
we manage for third parties
Outlook
This year’s results are excellent with
all metrics sharply higher, and trading
since the period end is good. The
continued strong demand and high
occupancy levels across our stores
give us pricing opportunities in the
coming year.
08
Lok’nStore Group plc Annual Report and Accounts 2022 09
Strategic ReportEnvironmental and SocialOverviewGovernanceFinancial Statements Group at a Glance
Lok’nStore Group plc is one of the
leading companies in the fast-growing
UK self-storage market.
We opened our first self-storage centre in
1995 and have grown consistently over the
last 27 years, currently with 40 self-storage
centres trading across England and one
in Wales.
We have been listed on the AlM Market since
June 2000 and the Board accounts for 28.6%
of the Total Voting Rights (TVR) in the ordinary
shares of the Company (2021: 29.4%).
We offer self-storage from our own stores, and
management services to third-party storage
owners. Self-storage and other storage
services are available to both household and
business customers at our highly branded
Lok’nStore stores.
HOUSEHOLD
STORAGE
BUSINESS STORAGE
• Storage rooms
• Vehicle storage
• Student packages
• Forces and
services packages
• Pallet storage
• Self-storage archiving
• Flexible space
• Commercial
vehicle storage
REVENUE BY
CUSTOMER TYPE
NUMBER OF TRADING
STORES BY TYPE
NUMBER OF PIPELINE
STORES BY TYPE
69.9%
Household
customers
30.1%
Business
customers
24
Owned stores
16
Managed stores
40
Total trading
stores
8
Owned stores
1
Managed store
1
Leased
store
10
Lok’nStore Group plc Annual Report and Accounts 2022 17,000
CUSTOMERS
178
EMPLOYEES
Our Locations
Stores
Aldershot
Ashford
Basingstoke
Bristol
Broadstairs
Cardiff
Chichester
Crawley
Crayford
Dover
Eastbourne
Exeter
Fareham
Farnborough
Gillingham
Gloucester
Harlow
Hedge End
Hemel Hempstead
Horsham
Ipswich
Leicester
Luton
Maidenhead
Milton Keynes
Northampton Central
Northampton Riverside
Oldbury
Poole
Portsmouth
Reading
Salford
Southampton
Sunbury
Swindon
Tonbridge
Wellingborough
New Stores
Stevenage
Warrington
Wolverhampton
Pipeline Stores
Altrincham
Barking
Basildon
Bedford
Bolton
Bournemouth
Cheshunt
Kettering
Peterborough
Staines
To find out more about
our store locations visit:
www.loknstore.com
3
NEW STORES
40
STORAGE CENTRES
TRADING
10
PIPELINE
STORES
11
Strategic ReportEnvironmental and SocialOverviewGovernanceFinancial Statements 12
Lok’nStore Group plc Annual Report and Accounts 2022 Strategic
Report
14
The UK Self-Storage Market
16 Our Business Model
18 Our Strategy
19 Managing Director’s Review
24 Key Performance Indicators
26 Property Review
30
Financial Review
39 Section 172 Statement
40 Principal Risks and Uncertainties
LANDMARK STORE
WARRINGTON
58,175
LETTABLE SQUARE FEET
NOW
OPEN
OPEN
This Landmark site on the busy Winwick Road in
Warrington is the town’s first purpose built self-
storage facility.
This ultra-modern building is opposite the Warrington
Wolves Rugby League stadium and a large Tesco Extra
superstore, numerous car dealers and smaller shops.
The significant North-South arterial road upon which
the store is located has high traffic levels at all times of
day and the prominence combined with the modern
offering achieves great awareness of our storage product
amongst the local population of over 200,000 people.
Lok’nStore Warrington opened January 2022 and early
trading has been very encouraging.
13
Strategic ReportOverviewEnvironmental and SocialGovernanceFinancial Statements The UK Self-Storage Market
The UK Self-Storage Market at a Glance
The Self-Storage Association UK Annual Industry Survey 2022 reports
that the UK self-storage industry is made up of 2050 sites offering
52 million sq. ft. of space.
Market Overview
As reported in the Self-Storage
Association UK (SSA UK) Annual
Industry Survey 2022 the UK self-
storage market continues to grow
but remains under-developed relative
to Australia and the US. In the UK
there are an estimated 1,429 self-
storage facilities plus an additional
621 containerised sites, providing a
total of 52 million sq. ft. of storage
space. With a population of 68 million
people in the UK this equates to only
0.76 sq. ft. per person. Occupancy
rates across the UK industry at
31 December 2021 of built space
was 83.3%. This has increased from
76.2% at the start of the pandemic.
Drivers of Demand
for Self-Storage
Demand for self-storage by both
household and business customers
is driven by a specific need based
on changing circumstances as
well as economic activity and
business confidence.
For household customers their need
is often linked to a life event where
they will need space temporarily,
for example, to turn a box room
into a home office, but increasingly
householders are using storage on
a semi-permanent basis to free up
space at home or store belongings
they don’t have room for.
The structure of the UK industry
is changing. When the industry
first emerged companies were
predominately single owner sites
often located in industrial areas,
but larger operators (defined as
operators managing ten or more
sites), such as Lok’nStore, have
recently been developing purpose-
built stores in retail-facing locations
offering customers a higher standard
of product and service.
Business customers use self-
storage for a variety of purposes
including storage of goods, excess
or seasonal stock, document
archiving or storage of equipment
and tools. Businesses tend to store
for longer than household customers
and take larger units, although they
also take advantage of self-storage
for temporary periods to support
seasonal sales or office moves or
refurbishments.
Lok’nStore’s Opportunity
in the Market
The SSA UK Annual Industry Survey
2022 notes that public awareness
of and demand for self-storage is
increasing. We know that on average
customers chose a store within five
miles of their home or business.
With a secured pipeline of ten stores,
a further four stores at lawyers
and a continuing programme of
evaluating further site opportunities,
Lok’nStore is well placed to attract
new customers and add further
momentum to the growth of our
sales and profits.
Combining the Group’s competitive
strengths (recognised brand,
excellent customer service, rigorous
cost control) and the attractive
market dynamics of the storage
sector (growing sector, under
supply, resilience during economic
downturn) with our strong balance
sheet and flexible operating and
ownership model (see our portfolio
strategy), we believe Lok’nStore can
take advantage of the opportunities
presented and continue its growth
without significantly increasing risk.
The main barriers to entry to the
market remain the difficulty in
finding and securing suitable sites
as well as gaining the appropriate
planning consents. As a result, larger
operators now own or manage
around a third of all facilities which
translates to 45% of market share
in terms of revenue and space.
Currently Lok’nStore is the fifth
largest operator in the UK by
number of stores.
During the pandemic many of our
customers were providing critical
services distributing medical and
other essential supplies. We include
the NHS, GP surgeries, care
and home support services and
government departments amongst
our customers.
14
Lok’nStore Group plc Annual Report and Accounts 2022 Lok’nStore Hemel Hempstead
15
Strategic ReportOverviewEnvironmental and SocialGovernanceFinancial Statements Our Business Model
WHAT WE DO
HOW WE CREATE VALUE
• Buy or lease prominent sites
• Take a strategic and tactical approach to site
• Build highly visible orange Landmark
storage centres
• Offer clean, dry, secure storage to
business and household customers
• Offer managed storage services to
third-party owners
selection
•
Increase our asset base
• Careful cost control
• Drive store EBITDA growth through a closely
managed occupancy and pricing strategy
• Earn fees from managing stores on behalf
of others
• Carefully balanced use of leverage
40
UK STORES CURRENTLY TRADING
(INCLUDING 16 MANAGED STORES)
£26.9m
GROUP REVENUE
(2021: £21.9 MILLION)
16
Lok’nStore Group plc Annual Report and Accounts 2022 Our overriding objective is to increase the Cash Available for Distribution
(CAD) enabling a predictable growth of the dividend from a rising asset
base while maintaining a conservatively geared balance sheet.
SHARING VALUE WITH OUR STAKEHOLDERS
SHAREHOLDERS
CUSTOMERS
OUR PEOPLE
• High-quality earnings
• Easy to locate stores
• Growing NAV per share
• Friendly and high-quality
• Progressive dividend policy
17.25p
ANNUAL DIVIDEND
PER SHARE
customer service
• Wide range of storage
solutions
• Transparent and open
contracts
Rated
Excellent
ON GOOGLE WITH AN
AVERAGE SCORE OF
4.7 OUT OF 5 FROM
OVER 3,500 REVIEWS
• Personal development
through the Lok’nStore
Academy
• Regular opportunities
for career progression
through our expanding
store portfolio
• Uncapped bonus scheme
• Share ownership plans
• Regular gifts and rewards
for all colleagues
£0.73m
PAID OUT IN BONUSES
TO STORE TEAMS
(2021: £1.0 MILLION)
17
Strategic ReportOverviewEnvironmental and SocialGovernanceFinancial Statements Our Strategy
OUR OBJECTIVES
ACHIEVEMENTS IN 2022
STRATEGY IN ACTION
STEADILY INCREASE
CASH AVAILABLE FOR
DISTRIBUTION (CAD)
PER SHARE
FILL EXISTING STORES
AND IMPROVE PRICING
CAD per share up 36.7% to
38.7 pence (2021: 28.4 pence)
15%
INCREASE IN ANNUAL DIVIDEND
TO 17.25 PENCE PER SHARE
(2021: 15 PENCE PER SHARE)
We continued to improve
our online visibility through
evolution of our search
engine strategy
We focused on developing
our teams’ sales and
customer service through
the Lok’nStore Academy
TWO THIRDS OF STORES OVER
80%
OCCUPIED AT YEAR END
SELF-STORAGE PRICING UP
ACQUIRE MORE
SITES TO BUILD NEW
LANDMARK STORES
3 landmark stores opened
during the year
10 stores secured in planning
or development
Planning permissions achieved
at Peterborough and Kettering
INCREASE THE
NUMBER OF STORES
WE MANAGE FOR
THIRD PARTIES
1 managed store in
development and
1 opened during the year
13%
1
NEW SITE ACQUIRED IN BOLTON
4
SITES CURRENTLY AT LAWYERS
RECURRING MANAGED
STORE FEES UP
49%
KETTERING SITE ACQUIRED
BY THIRD PARTY INVESTOR
18
Lok’nStore Group plc Annual Report and Accounts 2022 Managing Director’s Review
“ Excellent operating performance
drives significant growth of
asset values.”
Neil Newman-Shepherd
Managing Director
Lok’nStore Group has had another
successful year delivering against
all of our strategic objectives. Once
again revenue, profits and asset
values have all moved sharply ahead.
In coming years our pipeline of new
stores will substantially increase the
proportion of our store space which
is new or purpose-built and will add
further momentum to the growth of
sales and profits.
Trading
Group revenue for the year was
£26.9 million, up 22.9% year on
year (2021: £21.9 million) driven by
occupancy increases and improved
pricing across our stores. This
revenue growth led to a 37.5%
increase in Group Adjusted EBITDA.
• Total self-storage revenue
£24.1 million up 17.3%
• Adjusted Store EBITDA
£14.9 million up 23.7%
• Unit pricing up 13.0%
• Managed store revenue
£2.8 million up 107%
• Recurring management
revenue £1.31 million up 49%
• £12.2 million invested in our
portfolio of stores this year
Total Adjusted Store EBITDA, a key
performance indicator of profitability
and cash flow of the business,
increased 23.7% to £14.88 million
(2021: £12.03 million). The overall
Adjusted EBITDA margin across all
stores was higher again at 61.6%
(2021: 58.3%) with the Adjusted
Store EBITDA margins of the freehold
stores at 65.5% (2021: 63.1%) and
the leasehold stores at 53.3%
(2021: 46.5%).
As the business develops the balance
of the stores continues to shift
towards Landmark freehold stores
and managed stores which have a
higher-than-average Adjusted Store
EBITDA margin at 65.5% and 100%
respectively versus 61.6% across
all stores. The impact of this will be
to continue to increase the average
Adjusted Store EBITDA margin of
the Group overall, and this effect
is accentuated by operating more
stores from a relatively fixed central
cost base. In this context the new
stores in the pipeline will make a
larger than average contribution to
Group profits and asset values as they
become established trading units.
In the table on page 20, we show
how the performance of the stores
varies between freehold and
leasehold stores. Currently 43.3% of
Lok’nStore branded trading space is
owned freehold, 20.5% is leasehold
and 36.2% is managed stores.
The freehold stores produce 71.8%
(2021: 76.9%) of the Adjusted Store
EBITDA and account for 91.4%
(2021: 91.8%) of valuations (including
secured pipeline stores). Leaseholds
trade on lower margins due to the
rent payable, but nevertheless
the 53.3% margin achieved is
substantial, and leads to a higher
return on capital than the freehold
stores which require much larger
capital expenditure to buy the land
and buildings.
This mix of tenures with their different
risk and return characteristics
provides flexibility in the balance
sheet and opportunities to create
value throughout the property and
economic cycle.
19
Strategic ReportOverviewEnvironmental and SocialGovernanceFinancial Statements Managing Director’s Review continued
Performance – Same Store Analysis14
FYE 31 July 2022
Group revenue
Self-storage revenue
Store Adjusted EBITDA
Group EBITDA
Operating profit (before non-underlying)
Operating profit (after non-underlying)
Operating costs
Profit before tax
Store EBITDA Margins
Headline Store Performance
31 July 2022
Same Store Performance
31 July 2022
Percentage
Increase
%
22.9
17.3
23.7
37.5
49.8
130.0
5.4
146.2
£’000
26,902
24,076
14,884
16,349
11,421
17,160
10,365
15,874
61.6%
Percentage
Increase
%
30.7
24.9
34.8
39.1
71.7
168.9
7.5
197.0
£’000
25,299
22,473
14,137
14,390
10,889
16,628
9,522
15,343
62.9%
Portfolio Analysis and Performance Breakdown
As at 31 July 2022
Number
of Stores
% of
Valuation
% of
Adjusted
Store
EBITDA
Adjusted
Store
EBITDA
Margin (%)
When Fully Developed
% Lettable
Space
Number
of Stores
Total %
Lettable
Space
Freehold
Leaseholds
Managed Stores
Total Stores Trading
Pipeline Stores*
Owned – Freehold
Owned – Leasehold
Managed Stores
Total Stores
15
9
16
40
8
1
1
50
*
Applies to the ten contracted stores only.
80.4
8.6
–
–
11.0
–
–
100
71.8
28.2
–
–
–
–
65.5
53.3
100.0
–
–
–
43.3
20.5
36.2
–
–
–
100
61.6
100
23
10
17
50
–
–
50
51.8
15.4
32.8
–
–
–
100
20
Lok’nStore Group plc Annual Report and Accounts 2022 17.3%
INCREASE IN
STORAGE REVENUE
23.7%
INCREASE IN
ADJUSTED
STORE EBITDA
13%
INCREASE IN
PRICE PER OCCUPIED
SQUARE FOOT
In the table below we show how the performance breaks down across the stores based on age. Clearly older stores
have had more time to fill up and produced 72.8% EBITDAR margins. Over time as new stores and pipeline sites
go through their life cycle they will progress towards similar margins, adding substantially to revenues and profits.
Operating Performance by Age of Store (Lok’nStore Owned Stores Only)
Weeks Old
Year Ended 31 July 2022
Sales £’000
Stores Adjusted EBITDA £'000
EBITDA Margin (%)
Store Adjusted EBITDAR £'000
EBITDAR Margin (%)
As at 31 July 2022 ('000 sq. ft.)
Maximum Net Area
Freehold/Long Leasehold (‘000 sq. ft.)
Short Leasehold ('000 sq. ft.)
Number of Stores
Freehold
Short Leasehold
Total Stores
Pipeline
Under 100
100 to 250
Over 250
Total
481
(400)
(83.2%)
(395)
(82.2%)
169
169
–
3
–
3
3,734
2,504
67.1%
2,504
67.1%
285
285
–
5
–
5
19,961
12,780
64.0%
14,523
72.8%
1,018
583
435
11
9
20
24,1761
14,884
61.6%
16,632
68.8%
2,033
1,548
485
27
10
372
561
511
50
8
1
9
1
2
In respect of the Farnborough Store (over 250 weeks) the total store revenue includes a £100,000 contribution receivable from Group Head Office.
The 37 stores include performance of the four sale and manage-back stores up to 31 January 2022 prior to their disposal. At the year-end the total
number of owned stores was 33.
The internet continues to be the main
media channel for our advertising.
Our website at www.loknstore.
co.uk is one of the most established
self-storage websites in the UK.
The website delivers a high level of
customer experience across desktop
and mobile devices. Any new
development of the website begins
with a mobile first focus. 60% of visits
to the website in the year were from
a mobile device, consistent with last
year. This is a very dynamic area, and
we are committed to its continued
development. We believe the internet
provides a strong competitive
advantage for the major operators
such as Lok’nStore with relatively
large marketing budgets.
Pipeline of New Stores
Against this background of ever
improving operating performance,
we have invested £12.2 million
(2021: £26.9 million) in new store
development this year and we
have a new store pipeline of ten
secured stores by the reporting
date, which will take the total to
50 stores. These will all be purpose-
built Landmark stores in highly
prominent locations and will add
substantially to the Group’s capacity
for revenue, profit and asset growth.
We believe that the UK self-storage
market is still in its infancy with
low penetration and increased
consumer awareness leading to
faster fill up rates.
Marketing
New customers are typically drawn
to Lok’nStore by three key drivers:
• Our distinctive Landmark stores
• Google and other search engines
• Existing or previous customers
and customer referrals
Store visibility remains pivotal to
our marketing efforts. With their
prominent positions, distinctive
design, and bright orange elevations
our stores raise the profile of the
Lok’nStore brand and help to
generate a substantial proportion
of our business. Our Landmark
stores are in highly prominent
locations, and we continually
invest in new signage and lighting
at our existing stores as well as
creating striking designs for our new
Landmark stores, to promote and
enhance their visual prominence
and engage the local community.
21
Strategic ReportOverviewEnvironmental and SocialGovernanceFinancial Statements Managing Director’s Review continued
Sale and Manage-Back of
Four of our Freehold Stores
On 31 January 2022, the Group
executed the Sale and Manage-Back
of four of its freehold stores for a
total gross consideration of £39.0
million realising a significant premium
of 22.8% to the stores valuation at
31 July 2021. The purchaser was
an existing institutional managed-
store client wholly independent of
Lok’nStore and its Directors.
Lok’nStore continue to manage
the stores located in Basingstoke,
Cardiff, Horsham, and Portsmouth,
as branded Lok’nStore operations
maintaining the operational footprint of
the business. Lok’nStore will receive
management and performance fees
for managing them on behalf of their
new owner. The total consideration of
£39 million receivable was subject to
a £1.8 million downward adjustment in
respect of certain committed works to
be completed by Lok’nStore at two of
the sites.
The net proceeds of the sale will
be recycled into new, fast-growing
Landmark stores.
In the year to 31 July 2021, the four
stores generated revenue of £2.54
million and contributed £1.54 million
to Group EBITDA. In the six months
to 31 January 2022, the four stores
generated revenue of £1.50 million
and contributed £0.97 million to
Group EBITDA. In the six months
post the sale in January 2022, the
Group has received management
fees of £0.151 million in respect of
the manage-back arrangement
which flow directly to Group EBITDA.
The historic cost of the four stores
was £13.75 million and their stated
fair value at 31 July 2021 was
£31.75 million.
This transaction does not impact
the Group’s ability to grow its
annual dividend in line with market
expectations and which is well
covered by projected CAD profit
levels of the business going forward.
Managed Stores
Revenue Increasing
Total managed store revenue in the
year was up by 107% to £2.79 million.
Recurring management fees were
up by 49% to £1.31 million as we
increased the number of stores
under management, including
opening the new Landmark store in
Wolverhampton in March 2022 as
well as the four stores transacted to
a managed store client in January
2022. At the year-end we had 16
Managed Stores operating with the
Kettering store due to go on site in
the coming months.
Income from non-recurring fees was
up dramatically in the year to £1.47
million. Although these fees are
irregular in nature, this demonstrates
the contractually embedded value in
the managed stores income stream.
Non-recurring fees come from various
sources such as including planning
success fees, construction and
advisory fees and fees crystallised
when an asset transaction occurs.
Management fees
Recurring fees
Base management fees
Administration and compliance fees
Management performance fees
Non-recurring fees
Construction & advisory fees
Supplementary fees
Percentage
Increase
%
Group
Year ended
31 July 2022
£
Group
Year ended
31 July 2021
£
722,084
86,916
504,379
49%
1,313,379
12,500
1,459,177
1,471,677
217%
515,940
59,500
307,184
882,624
12,500
451,140
463,640
Total management fees
107%
2,785,056
1,346,264
22
Lok’nStore Group plc Annual Report and Accounts 2022 The graph below shows how our historical management fees have grown and indicates a strong correlation between
the total management fee income and the number of stores under management.
Management Fees
£3,000,000
£2,500,000
£2,000,000
s
’
£
£1,500,000
£1,000,000
£500,000
£0
N
u
m
b
e
r
o
f
M
a
n
a
g
e
d
S
t
o
r
e
s
18
16
14
12
10
8
6
4
2
0
Recurring
Non-Recurring
Number of Managed Stores
Future
Lok’nStore has had an excellent
year, with all our trading and
financial metrics moving ahead
briskly, demonstrating the strength
of the self-storage business model
throughout the economic cycle.
Trading has remained good since
the year-end.
We are currently experiencing some
cost pressure, but the business is
sheltered from this effect by high
EBITDA margins and our ability to
raise rates charged.
Against the background of a strong
performance from our existing
stores, we have a secured pipeline
of ten new stores plus a further
four at lawyers all of which will add
considerable momentum to sales
and earnings growth in the future.
Our flexible model allows us to
develop these new stores when
market circumstances dictate.
Neil Newman-Shepherd
Managing Director
28 October 2022
23
Strategic ReportOverviewEnvironmental and SocialGovernanceFinancial Statements
Key Performance Indicators
What we mean when we say … (and why we use these Key Performance Indicators (KPIs))
In addition to IFRS accounting performance measures we use some
Alternative Performance Measures (APMs) to help us explain how the
underlying business is performing.
Here we identify those measures and explain what we mean when we
use them and, importantly, why we use them:
Group Adjusted Earnings before interest, tax,
depreciation and amortisation
Adjusted EBITDA is defined as EBITDA before
losses or profits on disposal, share-based payments,
acquisition costs, non-underlying items and which
demonstrates the cash generative qualities of
the business.
5.
Non-underlying items
Refers to one-off items of a non-operational nature
which arose during the year, and which may relate
to asset disposals, abortive site acquisition costs,
or other costs and which are likely to be infrequent
events. (Refer to note 4 of the Financial Statements).
6.
Cash Available for Distribution (CAD)
Is calculated as Adjusted EBITDA less total net
finance cost, less capitalised maintenance expenses,
New Works Team costs and current tax. This
measures the capacity of the business to pay
dividends or pay down debt. The Cash Available for
Distribution per share is CAD divided by the number
of shares in issue less shares held in the Employee
Benefit Trust (EBT). The calculation of the CAD and
the CAD per share is set out in the Financial Review.
Adjusted Total Group Assets
The value of adjusted total assets of £370.9 million
(2021: £294.8 million) is calculated by adding the
independent valuation of the leasehold properties
of £24.2 million (2021: £22.1 million) less their
corresponding net book value (NBV) £7.2 million
(2021: £7.6 million) to the total assets in the
Statement of Financial Position of £353.9 million
(2021: £280.3 million). This provides clarity on the
significant value of the leasehold stores as trading
businesses which, under the Group’s accounting
policy on leases, are only presented at their book
values within the Statement of Financial Position.
Adjusted Net Asset Value per share
(NAV per share)
Adjusted Net Asset Value per share is the net
assets adjusted for the valuation of leasehold stores
(properties held under leases) and deferred tax
divided by the number of shares at the year-end.
The shares held in the Group’s employee benefits
trust and treasury shares are excluded from the
number of shares. The calculation of the Net Asset
Value per share is set out in the Financial Review.
Loan to Value ratio (LTV)
Measures the net debt of the business expressed
as a percentage of total property assets giving a
perspective on the gearing of the business.
The calculation is based on net debt (excluding
deferred finance costs) of £20.3 million expressed
as a percentage of the total properties independently
valued by JLL of £279.0 million (2021: £234.9 million)
and development land assets of £29.2 million
(2021: £33.7 million) totalling £308.2 million (2021:
£268.6 million) as set out in the Financial Review
in the Analysis of Total Property Value table.
7.
8.
Average Cost of Debt
The average cost of debt is calculated by taking the
total interest paid on the Group’s Revolving Credit
Facility in the quarterly/weekly charging periods
throughout the year and taking an average based
on the whole financial year. Apart from the Group’s
Revolving Credit Facility the Group has no other bank
debt. The average cost of debt 1.71% (2021: 1.54%).
Pipeline Sites
Sites for new stores that either we have exchanged
contracts on or have agreed heads of terms and are
progressing with our lawyers towards completion.
We have 14 pipeline sites of which ten are contracted
and four are progressing with lawyers. We currently
have 24 owned stores trading with an additional
16 managed stores trading. When these 14 sites
are fully developed, we will have a total of 54 stores.
1.
2.
3.
4.
24
Lok’nStore Group plc Annual Report and Accounts 2022 9.
Secured Pipeline Sites
The ten sites for new stores on which we have
exchanged legal contracts. Of these nine stores are
Lok’nStore owned Stores and one will be a managed
store. When these ten sites are fully developed, we
will have a total of 50 stores.
10. Adjusted Store EBITDA
Group Adjusted EBITDA (see 1 over) before the
deduction of central and head office costs. Unlike
Group Adjusted EBITDA this measure excludes the
impact of IFRS 16 and includes leasing charges as
normal operating costs of each store. The measure
is designed to give clarity on the recurring operating
cash flow of the business and provides important
information on the underlying performance of the
trading stores and shows the cash-generating core
of the business. Use of this metric enables us to
provide additional information on store EBITDA
contributions (after leasing costs) and the margins
analysed between freehold and leasehold stores
and according to the age of the stores. This analysis
is set out in a table in the Financial Review.
11. Gearing
Refers to the level of debt compared to equity
capital, usually expressed in percentage form. It is
a measure of a company’s financial leverage and
shows the extent to which its operations are funded
by lenders versus shareholders. Gearing can be
measured by a number of ratios, and we use the
debt-to-equity ratio in this document. The calculation
of the gearing percentage, also referred to as the
net debt to equity ratio is set out in note 17 of the
Financial Statements.
12. Group Adjusted EBITDAR
is Group Adjusted EBITDA before the deduction
of rent. The measure is designed to give clarity on
the effect of the rent payable by leasehold stores
and how its elimination enables a comparison
between the operating performance of freehold
stores (which do not pay rent) and leasehold stores
which pay rent. This analysis is set out in a table in
the Financial Review.
13. Cost Ratio
Calculates the ratio of the total operating costs of
the business as set out in the Financial Review,
expressed as a percentage of total Group revenue
(note 1), giving a perspective on the cost efficiency
of the business when compared to the cost ratio
of the previous year. The Cost Ratio has been
reduced further to 38.5% (2021: 44.9%).
14. Same Store Analysis
This measure is used to give transparency on
improvements in the operating business in the year
unrelated to the opening of new stores, closure of
old stores, and more particularly in this financial
year, the sale and manage-back of previously
owned stores (Basingstoke, Cardiff, Horsham and
Portsmouth stores) commenting on stores that
were open and trading at both financial year ends
31 July 2021 and 31 July 2022. The same store
key performance measure helps to illustrate the
performance of the underlying business.
See also the glossary on page 123.
25
Strategic ReportOverviewEnvironmental and SocialGovernanceFinancial Statements Property Review
Store and Portfolio Strategy
Our strategy is to continue to increase the number
of stores we operate without stretching our balance
sheet. The core focus of this strategy is the acquisition
of highly prominent freehold locations in busy towns
and cities in England where we will build well-branded
Landmark stores.
Lok’nStore’s rising operating cash flow, solid asset base,
and tactical approach to its store property portfolio
provide the Group with opportunities to improve the
terms of its property usage in all stages of the economic
cycle. Our focus on the trading business gives us many
opportunities and our property decisions are always
driven by the requirements of the trading business.
Flexible Approach to Site Acquisition
All the projects noted below are part of our strategy of
actively managing our operating portfolio to ensure we
are maximising both trading potential and value. This
includes strengthening our distinctive brand, increasing
the size and number of our stores, and replacing stores
or sites where it will increase shareholder value.
We are focused on allocating capital in the most efficient
manner to achieve our objectives.
We prefer to own freeholds if possible, and where
opportunities arise, we will seek to acquire the freehold
of our leasehold stores. However, we are happy to
take leases on appropriate terms and benefit from the
advantages of a lower entry cost, with further options to
create value later in the store’s life cycle.
Sale and Manage-Back of Stores
We also consider selling established stores on sale and
manage-back contracts in order to recycle the capital
into the development of new Landmark stores and
manage the balance sheet as part of our successful
growth strategy and disciplined capital allocation. Indeed,
some of our stores have been freehold, leasehold,
and managed stores during their operating life cycle.
In the period we successfully completed on the sale
and manage back of four older stores which raised
net proceeds of £37.9 million to be recycled into new
Landmark stores.
The table below illustrates the rapid growth of store numbers and the changing tenure mix over time including the
growth of managed stores over recent years.
Lok’nStore Number of Stores Trading Since Inception
60
50
40
30
20
10
0
26
5
9
9
1
6
9
9
1
7
9
9
1
8
9
9
1
9
9
9
1
0
0
0
2
1
0
0
2
2
0
0
2
3
0
0
2
4
0
0
2
5
0
0
2
6
0
0
2
7
0
0
2
8
0
0
2
9
0
0
2
0
1
0
2
1
1
0
2
2
1
0
2
3
1
0
2
4
1
0
2
5
1
0
2
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
1
2
0
2
Managed
Leasehold
Freehold
With Lawyers
2
2
0
2
Y
H
e
n
i
l
e
p
P
i
.
l
c
n
I
Lok’nStore Group plc Annual Report and Accounts 2022
40
10
29.6%
STORES NOW
TRADING
NEW LANDMARK
STORES SECURED
ADDED BY NEW STORES
TO TRADING SPACE
Our most important consideration is always the trading
potential of the store rather than the property tenure and
sale and manage-backs have these additional advantages:
i)
The critical mass of store numbers benefits the
business (e.g. through Google search and sharing
of other marketing costs)
ii)
It spreads the central management costs
iii) Through the performance and exit fees we are
exposed to the trading and capital upside without
committing capital
At 31 July 2022, Lok’nStore operated 24 of its own stores.
Of these Lok’nStore owns 15 freehold and 9 leasehold
stores. All nine leasehold stores are all inside the Landlord
and Tenant Act providing us with security of tenure. The
average unexpired term of the Group’s leaseholds is 10
years and one month as at 31 July 2022. We operate 16
further stores under management contracts.
The lease on the Sunbury store expired on the 30/07/2022.
We are in dialogue with the landlord regarding a new lease
on the existing site or in a new site. In the meantime, we
continue to trade from the current store which benefits
from being inside the Landlord and Tenant Act.
Our Exciting Landmark Store Pipeline
• We have ten stores in our current Secured Pipeline
of which eight are freehold, one is leasehold and
one managed
• We are on site at four stores that will open during
2023 with a fifth site due to commence shortly
• Four new store opportunities are progressing with
lawyers
• Current Pipeline of ten contracted stores adds
29.6% of extra trading space to the overall portfolio,
44.1% to our owned portfolio and 5.9% to the
managed portfolio
All ten stores in our Secured Pipeline9 are in prominent
locations with large catchment areas and little
established competition and demonstrate the Group’s
ability to source high-quality sites adding to future sales
and earnings growth. These eye-catching buildings,
with their distinctive orange Lok’nStore branded livery
and prominent signage, create highly visible landmarks,
which continue to be a big source of new customers.
Summary of our current pipeline at 31 July 2022:
Store
Bedford
Size
sq. ft.
Status
On site at
31 July 2022
sq. ft.
On site at
31 October 2022
sq. ft. (Additional)
On site after
31 October 2022
sq. ft. (Additional)
55,978
On site – opening early 2023
55,978
Peterborough
45,900 On site – opening spring 2023
45,900
Staines
Basildon
Kettering
66,500 On site – opening summer 2023
66,500
49,700
On site – opening summer 2023
49,700
45,900 On site autumn 2022 –
45,900
Bournemouth
75,100
opening autumn 2023
Planning consent granted
Cheshunt
Altrincham
Barking
Bolton
60,300
Planning consent granted
63,900
84,200
59,100
Planning application submitted
Design
Design
75,100
60,300
63,900
84,200
59,100
Total – 10 stores
606,578
218,078
45,900
342,600
Total On site at 31 July 2022
Sq. ft. Trading (including Managed Stores) at 31 July 2022
Trading + On site at 31 July 2022
% Increase from on site sq. ft.
Total secured pipeline
Sq. ft. Trading (including Managed Stores) at 31 July 2022
Trading + secured pipeline at 31 July 2022
% Increase from secured pipeline sq. ft.
218,078
2,046,673
2,264,751
10.60%
606,578
2,046,673
2,653,251
29.64%
27
Strategic ReportOverviewEnvironmental and SocialGovernanceFinancial Statements
Property Review continued
During the year we opened three new stores in Warrington, Stevenage, and Wolverhampton. Early trading in all
new stores has been very encouraging. We acquired one new site during the year and have a further four sites
progressing with lawyers.
Store Opening Programme by Year
Financial
Year
Store
Opening
Pipeline
Lok’nStore Capital
Expenditure
Remaining
Growth
lettable area
Owned Portfolio
Cumulative growth
lettable area
Owned portfolio
Growth
lettable area
Total portfolio
Cumulative growth
lettable area
Total portfolio
2023
2024
2025
4
3
3
10
£28.0
£18.1
£26.0
£72.1
17.1%
10.7%
16.3%
44.1%
17.1%
27.8%
44.1%
10.7%
8.8%
10.1%
29.6%
10.7%
19.5%
29.6%
Portfolio Breakdown
When the contracted development pipeline of ten sites has been completed Lok’nStore will operate from 50 stores
including 17 managed stores. In addition, four further new store opportunities are progressing with lawyers. The
secured pipeline sites represent a combination of nine owned and one managed store. These will add 606,578 sq.
ft. of new capacity adding 44.1% to freehold and leasehold owned trading space and 5.9% to the managed store
portfolio delivering a 29.6% increase in overall trading space.
Portfolio Breakdown
As at 31 July 2022
Freehold & Long Leasehold
Leaseholds
Pipeline (Freehold)
Pipeline (Leasehold)
Managed Stores (Trading)
Managed Stores (Pipeline)
Total
MLA sq. ft.
No of
Stores/Sites
Trading
Lok’nStore
Trading
Managed
Pipeline
Secured
With
Lawyers
15
9
12
1
16
1
15
9
–
–
–
–
–
–
–
–
16
–
–
–
12
1
–
1
–
–
8
1
–
1
–
–
4
–
–
–
54
2,888,251
24
1,271,873
16
774,800
14
841,578
10
606,578
4
235,000
Managed Stores
• Circa £150 million of Store assets under management
• 49% increase in recurring management fees earned
Lok’nStore manages an increasing number of stores for third-party owners. Under this model Lok’nStore can provide
a turnkey package for investors wishing to own trading self-storage assets. The investor supplies the capital for the
project which Lok’nStore manages. Lok’nStore will buy, build and operate the stores under the Lok’nStore brand and
within our current management structure.
During the period the Group opened the Wolverhampton Managed Store on 25 March 2022. The new Kettering store
will be on site autumn 2022 and open in 2023.
For managed stores Lok’nStore receives a standard monthly management fee, a performance fee based on certain
return hurdles and fees on a successful exit. We also charge acquisition, planning and branding fees. This allows
Lok’nStore to earn revenue from our expertise and knowledge of the self-storage industry without committing our
capital. We can amortise various fixed central costs over a wider operating base and drive more visits to our website,
moving it up the internet search rankings and benefitting all the stores we both own and manage.
28
Lok’nStore Group plc Annual Report and Accounts 2022
This strategy improves the risk adjusted return of the business by increasing the operating footprint, revenues and
profits without committing capital. There is a strong correlation between the total management fee income and the
number of stores under management.
We now manage approaching £150 million of assets under this structure on which we generated managed store
income of £2,785,056 this year, up 107% (2021: £1,346,264) from the previous year. We expect this to continue
increasing steadily over the coming years as more managed stores are opened. Second half income was
stronger and includes additional fees from store openings and non-recurring fees contributed to benefit additional
supplementary fees (Initial branding fees etc). Managed store income is generated from our existing platform and
central management, resulting in an effective margin from this activity of 100%.
Growing Store Property Assets and Net Asset Value
• Adjusted Total Assets £370.9 million4 up 25.8% on last year (2021: £294.8 million)
• Adjusted Net Asset Value of £9.72 pence per share up 33% on last year (2021: £7.31 per share)
• Value of operating stores £279.0 million up 18.8% on last year (2021: £234.9 million)
• Total property assets £309.7 million up 14.7% on last year (2021: £270.1 million)
Our freehold and leasehold stores have been independently valued by Jones Lang LaSalle (JLL) at £279.0 million
(as at 31 July 2022 (2021: £234.9 million).
Adding our stores under development at cost, and land and buildings held at director valuation, our total property
valuation is up 14.7% to £309.7 million (2021: £270.1 million). The increase in the values of properties which were also
valued by JLL last year was 22.6% (2021: 22.8%).
The significant change in property valuation is referred to further in the Financial Review section of the Strategic
Report and is detailed in note 12(a) of the notes to the financial statements. The principal drivers for this increase are:
• The trading stores have continued to trade at high occupancy. The stabilised occupancy assumed by JLL is
materially unchanged at 88.23% (2021: 88.85%)
• Discount Rates and Exit Yields applied by JLL have also compressed this year
• Transactional activity in the UK and across Europe remains strong
• There is an increasing amount of capital looking to access the self-storage market, with a real step change in the
interest in the sector, with major private equity and institutions either having entered the market, (Schroders, Legal
and General and the Carlyle Group) or are looking to enter the market. More recently, Angelo Gordon, GIC and
Heitman have committed significant capital to the sector, with other institutions looking to enter the market either
through direct acquisition or by funding new store developments
Post year-end we have seen considerable market turbulence which may have an effect on the future valuations of
our stores but which may be offset to some degree by improvements in trading and trading outlook. In note 12(a)
we set out the likely effects of a 50 bps and a 100 bps increase / decrease in Discount Rate and Exit Yield.
“ Self-storage is widely viewed as an inflation hedge. The sector has proved itself as a resilient
asset class that generally performs well during economic stress events as was seen during
the Global Financial Crisis and the COVID-19 pandemic.”
JLL
2022 Valuation report
29
Strategic ReportOverviewEnvironmental and SocialGovernanceFinancial Statements Financial Review
“ Disciplined capital allocation
and investment into fast-growing
Landmark assets.”
Ray Davies
Finance Director
The Group has reported record
revenue and profits with all KPI
metrics up on the previous year.
Financial Results
• Group Revenue £26.9 million
up 22.9% (2021: £21.9 million)
• Group Adjusted EBITDA1*
£16.4 million up 37.5%
(2021: £11.9 million)
• Profit before Tax £15.9** million
up 146.3% (2021: £6.5 million)
• Operating Profit £17.2 million
up 130.0% (2021: £7.5 million)
• Cash available for Distribution
(CAD) per share up 36.6% to
38.7 pence (2021: 28.4 pence)
• Final dividend up 14.8%
to 12.25 pence per share
(2021: 10.67 pence per share)
• Cash balance £46.5 million
(2021: £9.1 million)
• Bank facility extended by one
year to April 2026
On 20 October 2021, the Group
executed the accordion arrangement
embedded within the Revolving
Credit Facility which increases the
loan facilities available to the Group
from £75 million to £100 million.
In addition, the Group has also
agreed a one-year extension on its
existing joint banking facility. The
facility is a joint agreement with
ABN AMRO NV and NatWest Bank
plc participating equally and is
closely aligned to the terms of
the Group’s previous facility. ABN
AMRO NV replaced Lloyds Bank plc
in June 2021 as one of the Group’s
banking partners.
The facility, which was due to
expire in April 2025, will now run
until April 2026 providing funding
for more Landmark site acquisitions.
The two principal bank covenants
(LTV and Senior Interest) and margin
are unaffected by the execution of
the accordion and this extension
of term.
Amendments to the Facility
Agreement dealing with the transition
from LIBOR to SONIA (Sterling
Over Night Indexed Average) have
also been made, fulfilling the UK
regulator’s requirements ahead
of LIBOR’s phasing out after
31 December 2021.
Management of
Interest Rate Risk
Lok’nStore generates an increasing
cash flow from its strong asset base
with a low LTV net of cash of 6.6%
and a low average cost of debt of
1.71%. The value of the Group’s assets
underpins a resilient business model
with stable and rising cash flows and
low credit risk giving the business a
firm base to fund future growth.
Interest Expense
and Bank Borrowings
• Average cost of debt 1.71%
(2021: 1.54%)
• Average cost of debt (on active
revolving loans at 31 July 2022)
2.71% (2021: 1.55%)
With £66.8 million of gross debt
currently drawn against the £100
million bank facility the Group is not
committed to enter into interest rate
hedged instruments but continues
to keep the matter under review. It is
not the current intention of the Group
to do so at this time given our low
level of net debt, low loan to value
ratio and high interest cover. During
the year the Group has continued
to benefit from relatively low lending
rates although it is recognised that
interest rates are now rising.
See our Key Performance Indicators on pages 24 and 25.
A significant part of this increase in profit before tax is due to the profit of £5.94 million arising on the sale of four trading stores, which is “non-recurring”
and separately disclosed in the Income Statement below “adjusted EBITDA” and in note 4 to the financial statements (non-underlying costs). Operating
profit is therefore increased by this amount.
*
**
30
Lok’nStore Group plc Annual Report and Accounts 2022 £26.9m
GROUP REVENUE
UP 22.9%
£16.4m
GROUP ADJUSTED
EBITDA UP 37.5%
£17.2m
OPERATING PROFIT
UP 130%
The gross bank interest expense
(before capitalisation of interest
costs, non-utilisation fees and loan
amortisation fees) for the year was
£1.30 million (2021: £0.85 million),
due to higher average debt and
higher average costs of borrowing.
These average costs of borrowing
have continued to rise after the year-
end and the Group’s current cost of
debt is running at 3.72%.
The Group continues to monitor
closely the effects of rising interest
rates on its senior interest covenant,
which is tested on a 12-month
rolling basis, and the Group’s flexible
business model will enable it to take
appropriate steps to mitigate its
effects should it be required.
Capitalised interest in the year on
our store development programme
was £589,983 (2021: £380,193). Total
finance costs in the Statement of
Comprehensive income increased to
£1.33 million (2021: £1.02 million).
Lok’nStore will continue to report on
the Cash available for Distribution
(CAD) which aims to look through
the statutory accounts and give a
clear picture of the ongoing ability
of the Company to generate cash
flow from the operating business that
can be used to pay dividends, make
investments in new stores, or pay
down debt. CAD was up 38.1% for
the year.
As agreed with the banks, both the
Loan to Value and Senior Interest
covenants set out in our bank facility
continue to be tested excluding the
effects of IFRS 16. For covenant
calculation purposes, debt / LTV
will continue to exclude right of use
assets and the corresponding lease
liabilities created by IFRS 16. When
testing the Senior Interest Covenant,
property lease costs will continue
to be a deduction in the calculation
of EBITDA, in accordance with the
accounting principles in force prior
to 1 January 2019.
Earnings Per Share
The calculations of earnings per share are based on the following profits and numbers of shares.
Total profit for the financial year attributable to owners of the parent
Weighted average number of shares
For basic earnings per share
Dilutive effect of share options1
For diluted earnings per share
Group
Year ended
31 July 2022
Group
Year ended
31 July 2021
£’000
12,077
£’000
3,283
2022
2021
No. of shares
No. of shares
29,287,451
29,035,104
549,321
527,846
29,836,772
29,562,950
1
Further options that could potentially dilute EPS in the future are excluded from the above because they are not dilutive in the period presented.
Full details of share options are included in notes 21 to 25.
Earnings Per Share
Basic
Total basic earnings per share
Diluted
Total diluted earnings per share
Group
2022
Pence
Group
2021
Pence
41.24p
11.33p
40.48p
11.10p
Basic earnings per share were 41.24 pence (2021: 11.33 pence per share) and diluted earnings per share were
40.85 pence (2021: 11.10 pence per share).
31
Strategic ReportOverviewEnvironmental and SocialGovernanceFinancial Statements Financial Review continued
Operating Costs
Cost Ratio
• Group operating costs amounted
to £10.4 million for the year
(2021: £9.8 million) up by 5.4%
• Cost ratio13* reduced further
to 38.5% (2021: 44.9%)
We have a strong record of
disciplined control of our Group
operating costs with same store
costs increasing by 7.5% (Refer
to same store analysis of Group
operating costs in the table below).
In the year Group operating costs at
a headline level were up 5.4% year on
year as we opened new Landmark
stores in Warrington and Stevenage.
We provide a breakdown below.
Overall, the cost ratio continues to
decrease as we grow revenue and
continue to bear down on costs.
Future cost increases are likely
to be driven by the expansion of
the business in the areas of rates,
staffing and marketing.
Group Operating Costs
Group Operations
Property costs
Adjustment for property lease rentals
Property and premises costs
Staff costs
Overheads
Total
Historically, overall cost increases
have been mainly driven by the
expansion of the business, however
we are now seeing some other cost
pressures through energy (significant)
and some wage costs (moderate),
and the insurance market has
hardened considerably as it re-rates
its risk/premium positions in the
light of store fires in the wider
self-storage sector.
Property costs increased by 10.9%.
These costs mainly constitute
rates, light and heat and property
maintenance and have risen in
recent years as we felt the effects
of higher rates and energy bills and
as we opened our new Landmark
stores which are generally larger
and therefore incur higher rates bills.
Staff costs increased by 1.9% as
we staffed the new stores which
was offset by lower performance
bonuses to our store colleagues.
The 7.3% increase in overhead
costs is principally due to a stepped
increase in audit fees as the audit
profession adjusts its fee rates in
response to higher regulatory costs.
Legal and professional costs related
to work on rent reviews, corporate
tax, increased valuation costs for
additional work commissioned by the
Group for valuation work completed
by JLL, and general compliance
work also increased. Peel Hunt
were appointed joint broker during
the year adding to the overall
brokerage costs.
Bank charges which now contain
a full year amortisation charge
(non-cash) in respect of bank fees
charged for the £25 million accordion
and the one-year RCF extension also
increased. Amortisation charges
for 2022 were £215,845 (2021:
£158,216). Other administrative costs
(computer support, telephones, PPS
and marketing etc) show no material
cost pressures.
Increase
in costs
%
Year ended
31 July 2022
£’000
Year ended
31 July 2021
£’000
10.9
12.0
10.4
1.9
7.3
5.4
5,304
(1,746)
3,558
5,369
1,438
10,365
4,783
(1,559)
3,224
5,269
1,341
9,834
On a same store basis, excluding the financial effects of the four trading stores sold and the new stores opened in
Warrington and Stevenage, the table below shows the overall Group cost increased by 7.5%.
Group Operations
Same Store analysis
Property costs
Staff costs
Overheads
Total
*
See our Key Performance Indicators on pages 24 and 25.
32
Increase
(decrease)
in costs %
Year ended
31 July 2022
£’000
Year ended
31 July 2021
£’000
11.6
4.3
10.8
7.5
3,135
5,062
1,325
9,522
2,808
4,853
1,195
8,856
Lok’nStore Group plc Annual Report and Accounts 2022 Cash Flow and Financing
At 31 July 2022, the Group had cash balances of £46.5 million (2021: £9.1 million) the large increase from the
previous year was due to the successful sale-and-manage-back of four stores during the year for net cash proceeds
of £37.9 million.
Cash inflow from operating activities before investing and financing activities was £18.57 million in the year to
31 July 2022 up 52.4% (2021: £12.19 million).
Increasing Cash Flow Supports 15% Annual Dividend Increase
• Annual dividend 17.25 pence per share up 15% (2021: 15 pence per share)
• Cash Available for Distribution (CAD) of 38.7 pence per share (2021: 28.4 pence per share)
• Cash Available for Distribution (CAD) up 38.2%
CAD provides a clear picture of ongoing cash flow available for dividends, new store development or debt repayment.
Analysis of Cash Available for Distribution (CAD)
Group Adjusted EBITDA
(Per Statement of Comprehensive Income)
Property lease rents
Net finance costs paid (excluding re-financing costs)
Capitalised maintenance expenses
New Works Team
Current tax (note 9)
Cash Available for Distribution
Increase in CAD over last year £
Increase in CAD over last year %
Closing shares in issue (less shares held in EBT)
CAD per share
Increase in CAD per share over last year
Group
Year ended
31 July 2022
£’000
Group
Year ended
31 July 2021
£’000
16,349
(1,746)
(1,395)
(120)
(125)
(1,572)
(4,958)
11,391
3,149
38.2%
11,890
(1,559)
(969)
(193)
(129)
(798)
(3,648)
8,242
2,069
33.5%
Number
Number
29,380,333
29,063,575
38.7p
36.7%
28.4p
33.3%
33
Strategic ReportOverviewEnvironmental and SocialGovernanceFinancial Statements Financial Review continued
Analysis of the core underlying business after adjustment for non-underlying items
During the year, the Group has benefited from a higher than usual level of non-recurring management fees of
£1.47 million and exceptional gains principally resulting from the sale of the four sale and manage-back stores
totalling £5.74 million. In the table below we separate these non-underlying items and non-recurring management
fee income to show the performance of the underlying business.
2022
£’000
Non-underlying
items and
non-recurring
management
fee income
Underlying
business
2021
£’000
Non-underlying
items and
non-recurring
management
fee income
Total
Underlying
business
Revenue
25,430
1,4721
26,902
21,428
4641
Total
21,892
Total property, staff,
distribution, and general costs
Adjusted EBITDA1
Depreciation
Equity-settled share-based
payments
Non-underlying items
Operating profit
Finance income
Finance cost
Profit before taxation
(10,553)
14,877
(4,727)
(201)
–
(4,928)
9,949
42
(1,328)
8,663
–
(10,553)
1,472
16,349
–
–
5,7392
5,739
7,211
–
–
7,211
(4,727)
(201)
5,739
811
17,160
42
(1,328)
15,874
(10,001)
11,427
(4,149)
(118)
–
(4,267)
7,160
1
(1,017)
6,144
–
(10,001)
464
–
–
(160)2
(160)
304
–
–
304
11,891
(4,149)
(118)
(160)
(4,427)
7,464
1
(1,017)
6,448
1 Represents non-recurring management fees.
2 Refer note 4 of the notes to the financial statements for the analysis of non-underlying items.
Analysis of Cash Available for Distribution (CAD) after adjustment for non-underlying items
Cash Available for Distribution
Adjustment for non-recurring management fees
Cash Available for Distribution on the underlying business
Increase in CAD over last year £
Increase in CAD over last year %
Closing shares in issue (less shares held in EBT)
CAD per share
Increase in CAD per share over last year
34
2021
£’000
8,242
(464)
7,778
2022
£’000
11,391
(1,472)
9,919
2,141
27.5%
Number
Number
29,380,333
29,063,575
33.8p
26.1%
26.8p
Lok’nStore Group plc Annual Report and Accounts 2022 Taxation
The Group has made a current tax
provision against earnings in this
period of £1.7 million (2021: £0.8
million) based on a corporation tax
rate of 19% (2021: 19%). The deferred
tax provision which is calculated at
forward corporation tax rates of 25%
is substantially a tax provision against
the potential crystallisation (sales)
of revalued properties and past
‘rolled over’ gains and amounts to
£63.2 million (2021: £46.8 million).
The external revaluation of the trading
stores and the rolled over gains
made on the sale and manage-back
of the four stores during the period
have both contributed to the uplift in
the total deferred tax provision at the
year-end (See note 20).
Gearing11* (excluding
IFRS 16 lease liabilities)
At 31 July 2022 the Group had
£66.8 million of gross bank borrowings
(2021: £65.4 million) representing
gearing of 9.9% (2021: 37.2%) on net
debt of £20.3 million (2021: £56.3
million). After adjusting for the uplift in
value of short leaseholds which are
stated at depreciated historic cost
in the statement of financial position
at £7.2 million (2021: £7.6 million),
gearing is 9.1% (2021: 33.8%). After
adjusting for the deferred tax liability
carried at year-end of £54.2 million
gearing drops to 7.1% (2021: 26.4%).
Gearing11* (including
IFRS 16 lease liabilities)
At 31 July 2022 the Group had
£66.8 million of gross bank
borrowings (2021: £65.4 million)
and £10.9 million of lease liabilities
(2021: £11.2 million) representing
gearing of 15.2% (2021: 44.6%) on
net debt of £35.5 million (2021: £67.5
million). After adjusting for the uplift in
value of short leaseholds which are
stated at depreciated historic cost
in the statement of financial position
at £7.2 million (2021: £7.6 million),
gearing is 17.0% (2021: 40.7%).
After adjusting for the deferred
tax liability carried at year-end of
£63.2 million gearing drops to 12.6%
(2021: 31.7%).
Capital Expenditure
The Group has an active new store
development programme. The Group
has grown through a combination of
building new stores, existing store
improvements and relocations. We
have concentrated on extracting
value from existing assets and
developing through collaborative
projects and management contracts.
Capital expenditure during the
period totalled £12.2 million. This
was primarily the purchase of the
Peterborough site, together with
ongoing construction and fit out
works at our sites in Stevenage,
final costs on Warrington prior
to opening, as well as planning
and pre-development works
at our Bedford, Bournemouth,
Peterborough, Altrincham, Barking
and Cheshunt sites.
The Group has capital expenditure
contracted but not provided for in the
financial statements of £11.21 million
(2021: £6.16 million). We carefully
evaluate the ongoing economic and
trading position before making any
further capital commitments and
can reduce capex quickly if the
market deteriorates.
Strong Balance Sheet,
Efficient Use of Capital,
Low Debt
• Revolving Credit Facility (RCF)
increased to £100 million
• £12.2 million invested in new
store pipeline (2021: £26.9 million)
• Net debt – (excluding leases)
£20.3 million (2021: £56.3 million)
• Loan to Value Ratio (LTV) net
of cash 6.6% (2021:21.0%)
• Cost of debt averaged 1.71% in
the year (2021:1.54%) on £66.8
million debt (2021: £65.4 million)
Lok’nStore has a good credit model,
with low debt and gearing and which
is strongly cash generative from an
increasing asset base. Increased bank
facilities, on competitive margins, and
extended to April 2026, positions the
business well for the future.
Statement of
Financial Position
Group net assets at the year-end
were £205.3 million, up 35.7%
(2021: £151.3 million). Freehold
properties were independently
valued at 31 July 2022 at £254.8
million up 19.7% (2021: £212.8
million). Please refer to the table
of property values on page 36.
The Parent Company’s net assets
have increased because of the
£6.0 million dividend paid up from
Lok’nStore Limited, the principal
operating business of the Group.
Market Valuation of
Freehold and Leasehold
Land and Buildings
It is the Group’s policy to commission
an independent external valuation
of its properties at each financial
year-end.
Our freehold stores have been
independently valued by Jones
Lang LaSalle (JLL) at £254.8 million
(2021: £212.8 million).
Accordingly, Adjusted Total Group
Assets4 have moved upwards sharply
in the year to £370.9 million up 25.8%
on 31 July (2021: £294.8 million). A
significant contributor to this increase
was the uplift from the external
valuation at 31 July 2022 combined
with the trading strength of our
business, as well as our investment
in new stores.
*
See our Key Performance Indicators
on pages 24 and 25.
35
Strategic ReportOverviewEnvironmental and SocialGovernanceFinancial Statements Financial Review continued
In this twelve-month period, we saw
a same-store uplift in valuations of
£43.7 million in our freehold and
leasehold trading stores, a 24.1%
increase. The like for like comparison
excludes the Sale and Manage-Back
of four stores located in Basingstoke,
Cardiff, Horsham and Portsmouth,
and the maiden valuations on our new
stores in Warrington and Stevenage.
£30.4 million of this valuation uplift
comes from improvements in both
the Discount Rate and Exit Yield
applied to the valuations. On our
owned freehold trading stores, we
have seen exit yields compress
on average from 6.15% at 31 July
2021 to 5.47% at 31 July 2022, with
Average Discount rates at 7.02%
compared to an average of 8.18%
at 31 July 2021. These improving
metrics reflect the increasing investor
demand for UK Self Storage assets.
The remaining £15.5 million of
valuation uplift comes from the
impact of improved cash flows of
the same store portfolio that were
valued last year.
At the full year-end in July 2021, we
saw significant improvements in the
cash flow assumptions applied by JLL
and these have been improved further
in this 2022 valuation demonstrating
the impact operating performance has
on asset values and why one of our
key objectives remains to fill existing
stores and continue improving pricing.
We are well positioned to benefit from
future changes with our high-quality
portfolio of stores. The Exit Yield and
Discount Rates applied are validated
by transactional evidence.
It remains the Group’s established
policy to undertake a comprehensive
external valuation at each year-end
and we will do so at the next year
end at 31 July 2023.
Valuations
It is not the intention of the Directors
to make any further significant
disposals of trading stores, although
individual disposals may be
considered where value can more
easily be added by recycling the
capital into new stores.
The valuations of our freehold
property assets are included in the
Statement of Financial Position at
their fair value.
The value of our leasehold stores in
the valuation totals £24.3 million (2021:
£22.1 million) but they are held at cost
less accumulated depreciation in the
Statement of Financial Position.
A deferred tax liability arises on the
revaluation of the properties and on
the rolled-over gain arising from the
disposal of some properties. It is not
envisaged that any tax will become
payable in the foreseeable future on
these disposals due to the availability
of rollover relief.
We have reported by way of a
note, the underlying value of these
leasehold stores in revaluations and
adjusted our Net Asset Value (NAV)
calculation accordingly to include
their value. This ensures comparable
NAV calculations. An analysis of the
valuations achieved is set out in the
table below.
Analysis of Total Property Value
Freeholds1 valued by JLL2
Leaseholds valued by JLL3
Subtotal
Sites in development at cost1
Subtotal4
Freehold land & Buildings at Director valuation
Total
No. of
Stores/Sites
31 July 2022
Valuation
£
No. of
Stores/Sites
31 July 2021
Valuation
£
15
9
24
9
33
1
34
254,775
24,250
279,025
29,215
308,240
1,500
309,740
17
9
26
12
38
1
39
212,800
22,100
234,900
33,675
268,575
1,500
270,075
1
2
3
Includes £440,522 of capitalised interest during the year (2021: £314,891).
Includes related fixtures and fittings (refer note 12).
The nine leaseholds valued by JLL are all within the terms of the Landlord and Tenant Act (1954) giving a degree of security of tenure. The average
length of the leases on the leasehold stores valued was ten years and one month at the date of the 2022 valuation.
4
Loan to value calculation based on these property values.
Total freehold properties account for 92.2% of all property values (2021: 91.8%).
36
Lok’nStore Group plc Annual Report and Accounts 2022 Increase in Adjusted Net
Asset Value per Share
• Adjusted Net Asset Value per share
up 33% to £9.72 (2021: £7.31)
The shares currently held in the
Group’s employee benefits trust (own
shares held) and in treasury (zero) are
excluded from the number of shares.
Adjusted Net Assets per Share are
the net assets of the Group adjusted
for the valuation of leasehold stores
and deferred tax divided by the
number of shares at the year-end.
At July 2022, the Adjusted Net Asset
Value per share (before deferred tax)
increased 33% to £9.72 from £7.31
last year.
This increase is a result of higher
property values on our existing stores
as the strength of our Landmark
stores is recognised, combined with
cash generated from operations less
dividend payments, offset in part by
an increase in the shares in issue due
to the exercise of a small number of
share options during the year.
Analysis of Net Asset Value (NAV)
Net assets
Adjustment to include operating/short leasehold stores at valuation
Add: JLL leasehold valuation
Deduct: leasehold properties and their fixtures and fittings at NBV
Deferred tax arising on revaluation of leasehold properties1
Adjusted net assets
Shares in issue
Opening shares in issue
Shares issued for the exercise of options
Closing shares in issue
Shares held in EBT
Closing shares for NAV purposes
Adjusted net asset value per share after deferred tax provision
Adjusted net asset value per share before deferred tax provision
Adjusted net assets (see above)
Deferred tax liabilities and assets recognised by the Group
Deferred tax arising on revaluation of leasehold properties1
Adjusted net assets before deferred tax
Closing shares for NAV purposes
Adjusted Net Asset Value per share before deferred tax provision
31 July 2022
£’000
31 July 2021
£’000
205,346
151,259
24,250
(7,224)
222,372
(4,256)
218,116
Number
(‘000s)
29,687
317
30,004
(623)
29,381
£7.42
22,100
(7,630)
165,729
(3,618)
162,111
Number
(‘000s)
29,633
54
29,687
(623)
29,064
£5.58
31 July 2022
£’000
31 July 2021
£’000
218,116
63,214
4,256
285,586
29,381
£9.72
162,111
46,760
3,618
212,489
29,064
£7.31
1
A deferred tax adjustment in respect of the uplift in the value of the leasehold properties has been included, calculated by applying the substantively
enacted corporation tax rate of 25% (2021: 25%). Although this is a memorandum adjustment as leasehold properties are included in the Group’s
financial statements at cost and not at valuation, this deferred tax adjustment is included in the adjusted net asset value calculation in order to maintain
a consistency of tax treatment between freehold and leasehold properties.
37
Strategic ReportOverviewEnvironmental and SocialGovernanceFinancial Statements Financial Review continued
Post Balance Sheet
Acquisition of a development site
in Milton Keynes
On 4 October 2022, we exchanged
contracts on a freehold development
opportunity in Watling Street, Milton
Keynes subject to planning. This
highly visible roadside location in the
north west of the city complements
our existing leasehold store, 7 miles
to the south east. Once developed
the store will add c. 60,000 sq. ft. of
lettable area.
Summary
Lok’nStore Group operates within
the UK self-storage industry which is
still an immature sector with strong
growth prospects. With a low loan to
value ratio and plenty of headroom
on our bank facilities this market
presents an excellent opportunity
for further growth of Lok’nStore’s
business. Recently opened
Landmark stores and our ambitious
new store pipeline demonstrate the
Group’s ability to use those strengths
to exploit the opportunities available
throughout the economic cycle.
Ray Davies
Finance Director
38
Lok’nStore Group plc Annual Report and Accounts 2022 Section 172 Statement
Section 172 of the Companies
Act 2006 requires a director of a
company to act in a way he or she
considers, in good faith, would be the
most likely to promote the success
of the company for the benefit of its
members as a whole. In doing this
Section 172, requires a director to
have regard to:
The Directors give careful
consideration to the factors set out
above in discharging their duties
under Section 172, details of which
are contained throughout this Report.
The Board’s obligations under
Section 172 are considered at Board
meetings within each relevant section
of the Board pack.
•
•
•
•
the likely consequences of any
decision in the long-term;
the interests of the company’s
employees;
the need to foster the company’s
business relationships with
suppliers, customers and others;
the impact of the company’s
operations on the community
and the environment;
• maintaining a reputation for
high standards of business
conduct; and
•
the need to act fairly with
members of the company.
The stakeholders we consider in
this regard are our employees, our
customers, our shareholders, our
suppliers and the environment. The
Board recognises that building good
relationships with our stakeholders
will help us to deliver our strategy
in line with our long-term values
and operate the business in a
sustainable way.
The Board regularly receives
reports from management on
issues concerning customers, the
environment, suppliers, employees
and investors, which are discussed
and incorporated into decision-
making particularly with respect to
the Board’s Section 172 obligations
(S172). During the year, the Board
increased its bank facility by £25
million up to £100 million and
extended the term by one year
to April 2026, thereby increasing
the Group’s liquidity and working
capital to pursue its growth strategy
for shareholders. The Board also
executed the sale and manage-back
of four older stores generating over
£37 million of net cash which is now
available to recycle into new state-of-
the-art Landmark stores. These new
stores will in due course generate
more growth in revenue, profits and
dividends for shareholders but also
will have a positive environmental
effect as the new stores will have
solar PV and be generally more
energy efficient.
Further information on our approach
to S172 is to be found in the following
sections of our Annual Report:
Employees
Customers
Suppliers and partners
Investors
• Chairman’s Statement
• Managing Director’s Review
• Environmental and Social
• Chairman’s Statement
• Managing Director’s Review
• Environmental and Social
• Environmental and Social
• Governance
• Chairman’s Statement
• Managing Director’s Review
• Financial Review
• Governance
Environment & Sustainability
• Chairman’s Statement
Longer Term
• Managing Director’s Review
• Environmental and Social Report
• Chairman’s Statement
• Managing Director’s Review
• Financial Review
• Principal Risks and Uncertainties
• Page 4
• Page 19
• Page 45
• Page 4
• Page 19
• Page 45
• Page 45
• Page 53
• Page 4
• Page 19
• Page 30
• Page 53
• Page 4
• Page 19
• Page 45
• Page 4
• Page 19
• Page 30
• Page 40
39
Strategic ReportOverviewEnvironmental and SocialGovernanceFinancial Statements Principal Risks and Uncertainties
Principal Risks and Uncertainties
in Operating our Business
Risk management has been a fundamental part of the
successful development of Lok’nStore. The process
is designed to improve the probability of achieving
our strategic objectives, keeping our employees safe,
protecting the interests of our shareholders and key
stakeholders, and enhancing the quality of our decision-
making through understanding the risks inherent in both
the day-to-day operations and the strategic direction of
the Group as well as their likely impact.
Management of our risks helps us protect our reputation,
which is very important to the ability of the Group to
attract customers, particularly with the growth of social
media. We always try to communicate clearly with our
customers, suppliers, local authorities, communities,
employees, and shareholders, and to listen and take
account of their views. We operate strict Health and
Safety policies and procedures and more information
on these can be found on page 51.
Our Risk Management Governance
The Board has overall responsibility for the management
of the Group’s risks. As the Group’s strategic direction is
reviewed and agreed the Board identifies the associated
risks and works to reduce or mitigate them using an
established risk management framework in conjunction
with the executive management team. This is a continuing
and evolving process as we review and monitor the
underlying risk elements relevant to the business.
Risk Management Framework
The risk register covers all areas of the business including
property, finance, employees, insurance, customers,
strategy, governance, and disaster recovery. The risks
are categorised by risk area and numerically rated based
on a combination of ‘likelihood’ and ‘consequences and
impact’ on the business. The combination of these two
becomes the ‘risk factor’ and any factor with a rating
over 15 is reported to the Board.
Risk Management Team
Ray Davies, Finance Director, is the Board member
responsible for ensuring that the risk management
and related control systems are effective, and that
the communication channels between the Board
and the Executive Management team are open and
working correctly. The Executive Management Team
is responsible for the day-to-day management of the
risk factors. Responsibility for identifying, managing,
and controlling the risk is assigned to an individual as
shown on the risk register depending on the business
area. Reporting against the risks forms part of the
monthly executive management meeting and the risk
factor may be amended if applicable. There are also
sub-committees for particular risk areas which meet
regularly. The Risk Management and Reporting
Structure is shown below.
OUR RISK MANAGEMENT AND REPORTING STRUCTURE
THE BOARD
Reviews Risk Register in full twice a year
Considers specific risk areas as raised
by the Executive Board
EXECUTIVE BOARD COMMITTEE
Reviews risks at monthly executive management meetings and if material, requests the Board
consider risk at next scheduled Board Meeting (or earlier if necessary)
CAPEX COMMITTEE
PROPERTY RISK COMMITTEE
Meets Monthly
Meets Periodically
Manages proposed capital expenditure,
actual spend, rolling capex requirements
Considers: Risks associated with properties
including Health & Safety
Environmental Impact
40
Lok’nStore Group plc Annual Report and Accounts 2022 Principal Risks
The principal risks our business faces, and our key mitigations are outlined in the table below.
Risk
Description
Key Mitigation
Interest Rate
and Liquidity
Risk
The main risks arising from the
Group’s financial instruments are
interest rate risk and liquidity risk
(for details please see note 17).
Tax Risk
Treasury Risk
Changes to tax legislation may impact
the level of corporation tax, capital
gains tax, VAT and stamp duty land
tax which would in turn affect the
profits of the Group.
The Group may face increased
costs from adverse interest rate
movements. The Bank of England
has raised base rates six times since
February 2022 and is currently 2.25%
up from 0.1% in March 2020.
• Regular review by the Board (full details are set out in the
Financial Review, page 30).
• Debt and interest are low relative to assets and earnings. With
interest rates rising, this risk per se is increasing, however the
Executive and the Board monitor this position carefully through
the Group’s detailed operating reports produced on a weekly
basis and detailed financial and accounting reports produced
on a monthly basis.
• Could reduce debt, if required, by executing ‘Sale and Manage-
Back’ arrangements on mature stores or slow the rate of site
development.
• Regular monitoring of changes in legislation.
• Use of appointed professional advisers and trade bodies.
• On 20 October 2021, the Group executed the accordion
arrangement embedded within the Revolving Credit Facility which
increases the facilities available to the Group from £75 million to
£100 million. In addition, the Group has also agreed a one-year
extension on its existing joint banking facility.
• The facility, which was due to expire in April 2025, will now
run until April 2026 providing funding for more Landmark site
acquisitions. The two principal bank covenants (LTV and Senior
Interest) and margin are unaffected by the execution of the
accordion and this extension of term.
• Lok’nStore is a robust business which generates an increasing
cash flow from its strong asset base with a low LTV net of cash of
6.6% (2021: 21.0%) and a low average cost of debt of 1.71%. The
value of the Group’s assets underpins a flexible business model
with stable and rising cash flows and low credit risk giving the
business a firm base for growth.
• Average cost of debt 1.71% (2021: 1.54%)
• Average cost of debt (active revolving loans) 2.71% (2021: 1.55%)
• With £66.8 million of gross debt currently drawn against the
£100 million bank facility the Group is not committed to enter into
hedging instruments but continues to keep the matter under review.
• It is not the intention of the Group to enter into an interest rate
hedging arrangement at this time given our low level of net debt,
low loan to value ratio and high interest cover and the Group has
continued to benefit from relatively low lending rates although
recognising that these rates are now rising, and the group is
regularly monitoring this risk.
• The Group monitors compliance with its bank covenants closely
and during the year it complied with all of its bank covenants.
41
Strategic ReportOverviewEnvironmental and SocialGovernanceFinancial Statements Principal Risks and Uncertainties continued
Risk
Description
Key Mitigation
Property
Valuation Risk
The external independent valuations
of the stores are sensitive to both
operational trading performance of
the stores and also wider market
conditions. It follows that a reduction
in operational performance or a
deterioration of market conditions
could have a material adverse impact
on the Net Asset Value (NAV) of the
Group.
• Regular monitoring of any changes in market conditions
and transactions occurring within our marketplace.
• Use of independent professional valuers who are experts in the
self-storage sector. There is regular contact with the current valuer
JLL and discussions around market values and transactions
within the sector, including post year-end.
• Previous experience of downturns, such as the Dotcom and
global financial crises, has demonstrated that Self Storage has
considerable resilience.
• Stores are predominantly Landmark stores in prime locations and
are all UK based and predominantly located in the affluent South
of England. The Group is therefore not exposed to overseas/
international/ currency risks etc.
• Operational management teams with the skills, experience, and
motivation to continue to drive operational performance.
Environmental
Risk
Flooding.
• Flood risk due diligence undertaken on all prospective
Increased requirement to reduce
waste and greenhouse gas emissions
and reduce environmental impact
on the environment.
site acquisitions.
• Flood protection measures in place at all stores.
• Group has been measuring environmental impact since 2005
and is committed to manage waste effectively and control
polluting emissions.
• All new construction has solar power on the roofs of its buildings.
Property
Acquisition
Acquiring new sites is a key strategic
objective of the business but we face
significant competition from other
uses such as hotels, car showrooms
and offices as well as from other
self-storage operators.
• We hold weekly property meetings to manage the search process
and property purchases.
• Use of property acquisition consultants.
• Regular communication with agents.
• Attendance at industry relevant property events.
Planning
Permission
The process of gaining planning
permissions remains challenging.
Planning approval is increasingly
dependent on Social or Environmental
enhanced features such as BREEAM
standards, as well as local planners
demands for green spaces, cycle and
footpaths etc, all adding cost and
complexity to a planning project.
• Where we can we acquire sites subject to planning.
• We work with an established external planning consultant.
• Our property team has over 20 years’ experience in obtaining
planning consents for our stores.
Construction
Poor construction may affect the value
of the property and/or the efficient
operation of the store.
• We use a design and build contract with a variety of established
contractors.
• We use external project managers.
Rising costs of developing a store
may mean site opportunities which
do not meet management’s return
on investment criteria may not be
taken up.
• All projects are overseen by our property team which has over 20
years’ experience.
• Construction projects are subject to a tender process.
• Rising costs are factored into our financial modelling to ensure the
required returns are achievable.
42
Lok’nStore Group plc Annual Report and Accounts 2022 Risk
Description
Key Mitigation
Maintenance/
Damage
Damage to properties through poor
maintenance or flood or fire could
render a store inoperable.
• Regular site checks by team members.
• Rolling maintenance plan for all stores.
• Comprehensive disaster recovery plan.
• Appropriate insurance cover.
Increased
Competition
An increasing number of competitors
in the industry may negatively impact
Lok’nStore’s existing operations
(e.g. pricing/available sites).
• Established criteria for site selection including:
– Prominent locations
– High visibility
– Distinctive designs and bright orange elevations and signage to
attract customers.
• Continued investment in the Group’s website and internet
marketing.
• Ensure high levels of customer service through training and
monitoring.
• Aim to offer a good work/life balance and career development.
• Regular reviews of remuneration levels against market.
• Achievable bonus systems.
• Generous Employee Share Schemes.
• High-quality training within the Lok’nStore Academy (for further
information see page 51).
• Intranet for improved communications.
• Established Employee rewards programme.
• Regularly reviewed IT security systems.
• Well communicated policies and procedures for handling and
managing a systems breach.
• The Group has a well-defined policy and response developed and
executed throughout the recent Covid-19 pandemic.
• Our Covid-19 Group Safe Response has been documented in
detail in the Managing Director’s Review on page 20 in the 2021
Annual Report and is not repeated here.
Employee
Retention
Loss of employees may affect our
ability to operate our stores and
provide the high levels of customer
service expected.
Cyber security
and IT System
Breach
A breach of our IT systems might
adversely affect the operations and
income of the business resulting
in potential fines, customer
compensation and causing
reputational damage to the Group.
Future
Pandemic Risk
A spread of the virus and social
protection measures which may
be introduced by Government may
adversely affect the operations and
financial performance of the business
and adversely impact on the health
of staff.
43
Strategic ReportOverviewEnvironmental and SocialGovernanceFinancial Statements 44
Lok’nStore Group plc Annual Report and Accounts 2022 Environmental
and Social
46 Environmental Matters
50 Social Matters
ENVIRONMENTAL
MATTERS
Key Highlights
• Commitment to install PV
generation on all new stores
• Operational GHG emissions
down 92.5% since 2005
• Waste to landfill down 97%
since 2005
• Eliminated all single use
plastic in packaging range
• Gas use down 7% this year
• Waste down 32% this year
• Water use down 34% this year
45
Strategic ReportOverviewEnvironmental and SocialGovernanceFinancial Statements 53%
OF TRADING STORES
HAVE PHOTOVOLTAIC
PANELS
Environmental Matters
All New Stores Developed
by Lok’nStore will have:
• Photovoltaic panels
• BREEAM accreditation
• Electric Vehicle charging points
• LED Lighting
• Energy Performance Certificates
RENEWABLE
ELECTRICITY
NUMBER OF STORES
WITH EV CHARGERS
WASTE TO
LANDFILL
100%
of portfolio
20
of our 50 stores
will have EV
32%
Reduction
in 2021-22
Self-Storage Association (SSA) Environmental Initiative of the
Year Finalists
Lok’nStore are proud to have been finalists of the SSA Environmental Initiative
of the Year Award, having entered our Waste Reduction initiative reported
last year. Lok’nStore are at the forefront of environmental initiatives within the
industry, with the Lok’nStore Environmental Committee continuously reviewing
processes and initiatives that will drive our environmental impact down.
For more details of these initiatives please visit:
https://www.loknstore.co.uk/environment/
4646
Lok’nStore Group plc Annual Report and Accounts 2022
Lok’nStore Group plc Annual Report and Accounts 2022 100%
RENEWABLE
ELECTRICITY
32%
REDUCTION IN
WASTE THIS YEAR
100%
OF NEW STORES TO
HAVE PHOTOVOLTAIC
AND EV CHARGERS
Environmental Management and Performance
Lok’nStore is committed to its green policies. We
have been actively monitoring and measuring our
environmental impacts since 2005. By monitoring
environmental key performance indicators (eKPIs)
including greenhouse gas emissions (GHG), water
use and waste, and reviewing them against our stated
Environmental Policy, we continue to achieve our stated
aims; to manage waste effectively, control polluting
emissions and to encourage suppliers to minimise
their impact on the environment.
The UK government requires all quoted companies
to report on their GHG emissions as part of their
annual Director’s Report under the Companies Act
2006 (Strategic Report and Directors’ Report)
Regulations 2013.
As in previous years, Lok’nStore engaged Trucost, a
leading company in environmental, carbon data and risk,
to review the Group’s reporting of environmental impacts
for the financial year ended 31 July 2022. A summary of
their findings is included below. More detail can be found
on our website.
Highlights for the Year ended 31 July 2022
The Group’s operational Greenhouse Gas (GHG)
emissions (direct and indirect) increased by 20%, rising
from a low base of 75 tCO2e to 89 tCO2e. Following
nine years of decrease, the small increase this year
reflects largely on the return of travel in the business
following the emergence from the pandemic. Normalising
these emissions by annual revenue allows intensity
comparisons to be made. Lok’nStore recorded a 21%
higher emission intensity of 4.14 tCO2e per £million
in 2021-22. Over the long term, since 2005, we have
reduced these emissions by 92.5%.
Impact
Result Comment
Direct Operational
GHG Emissions
(Scope 1)
Indirect Operational
GHG Emissions
(Scope 2)
Renewable Energy
Generation
During FY2021-22 Lok’nStore’s Scope 1 emissions increased by 20% to 89 tCO2e from 75 tCO2e.
This year we had a 50% increase in direct GHG emissions from fuel used in travel. We saw a 7%
decrease in natural gas consumption.
Whilst we experienced an increase of 10% in total use of electricity across all of our sites, this is
reflective of the increased demand for self-storage and therefore use of our sites. We continue to
emit no indirect operational GHG emissions due to long-standing supply contacts for renewable
electricity and our own onsite photovoltaic.
Generation of electricity from our solar panels installed on our buildings is dependent on both the
number of panels fitted and sunshine hours and a 15% increase in energy generated at our sites
is largely reflective of more sunshine hours during the period. PV solar panels will continue to be
installed on new stores to increase electricity generated by our operations.
Water Consumption
In the year 2021–22, we have seen a 34% decrease in water consumption even though the total
number of stores trading has increased. Water intensity decreased by 34%.
Waste Generation
and Recycling
In the year 2021–22 total waste generation decreased by 32% while the total number of
trading sites increased. When adjusted for intensity we saw a 25% decrease in landfill waste.
The Group’s environmental reporting is consistent with ‘Environmental Key Performance Indicators:
Reporting Guidelines for UK Business 2006’.
Lok’nStore’s GHG reporting for 2021-22 aligns with government guidelines.
Trucost found that Lok’nStore assessed and disclosed all material environmental impacts –
GHG emissions, water consumption and waste generation for its own facilities.
– improvement in environmental performance year on year
– improvement in some measures during the year
This year, Lok’nStore had an increase in travel by its
colleagues due to the relaxation of COVID-19 restrictions
and the precautions we took as a business to minimise
its impact. This has seen an increase in Scope 1 direct
GHG emissions from car use by colleagues. Pre-pandemic,
colleague travel contributed to Scope 1 GHG emissions
of 170 tCO2e in 2018-19 which compares to 89 tCO2e in
the reporting year.
Like many businesses COVID-19 accelerated Lok’nStore’s
embrace of technology which allowed us to hold more
meetings remotely while still supporting our ever-expanding
store network.
The Board considers the impact our operations have on
the environment and minimising them wherever possible.
We will continue to monitor and report our environmental
impacts in line with government guidelines.
47
Strategic ReportOverviewEnvironmental and SocialGovernanceFinancial Statements
Environmental Matters continued
Our drive to net zero operational GHG emissions
Lok’nStore’s Greenhouse Gas (GHG) emissions from direct operational sources are limited to natural gas use, used
for heating and hot water only, and transport related fuel use. Lok’nStore decreased its Natural Gas use by 7% in the
year. The Natural Gas decrease is explained by replacement of gas boilers at the end of their useful life with electric
boilers, which take’s advantage of our electricity from 100% renewable sources. The increase in transport fuel in the
year is explained by the return to travel by colleagues, who travel for management and training purposes within our
regionally diverse business. This comparatively low generation of GHG’s and our efforts since 2005 to monitor and
reduce our operational GHG emissions, scope 1 and 2, have resulted in a significant 92.5% decrease over that time,
even as the business has grown from 19 to 40 stores. We continue to monitor and implement strategies to minimise
this very small tail of our direct emissions.
Lok’nStore Environmental Commitments and Targets
Lok’nStore has monitored and reported on GHG emissions since 2005 and has addressed many other
environmental factors along the way. Lok’nStore remains committed to positively impacting the environment. This
year, Lok’nStore is introducing targets that align with previous good performance with continued progress in this
area. The following targets recognise the need of continuing our ever-evolving environmental commitments and the
engagement of our colleagues to drive these forward.
OUR TARGETS
OUR COMMITMENTS
• To obtain Energy Performance Certificates for all
•
Install EV charging across all new stores
owned stores
• To complete a feasibility study on battery storage
to complement future PV systems
• To increase the number of stores with PV systems
• Optimising energy usage in stores
• Engage with our colleagues and customers
about our Green Credentials
• Review internal processes to continuously make
• Complete a feasibility study to retro fit all stores
green improvements
that are suitable for PV
• Review the benefit of swapping diesel van to an
electric van
• To trial the retro fitting of LED lighting in place of
lower efficiency fittings
•
Install PV on all new stores
CASE STUDY – Packaging
In 2019, Lok’nStore made a conscious decision to
remove all single use plastic from its retail displays
in our Stores and online to improve our customers’
environmental choice in this area. We also took the
decision to introduce paper tape to our range; plastic
packing tape is not recyclable and renders the boxes
unlikely to be recycled if it remains on the box when
entering the recycling process. By introducing paper
tape, to be sold alongside our boxes, this results in
both products being 100% recyclable when used in
conjunction with one another.
These activities have helped our customers to make
environmentally positive buying decisions. Lok’nStore
has replaced all single use plastic packaging on our
padlocks and multi-use furniture protection covers with
recyclable cardboard packaging. When creating the
design, we moved away from gloss sticky labels by
printing directly on to the packaging we have achieved
a 100% recyclable package. The addition of the well-
known recycling logo ensures that our customers are
aware they can put this packaging in to their recycling.
The result is that, with the addition of this recyclable
packaging, we have eliminated all single use plastic
and we are proud that 84% of our retail items are now
fully recyclable.
48
48
Lok’nStore Group plc Annual Report and Accounts 2022
Lok’nStore Group plc Annual Report and Accounts 2022 Lok’nStore Reduction in Environmental Impact
Lok’nStore began reporting on environmental factors
in 2005. Since then, Lok’nStore has been making
conscious decisions to make a positive environmental
impact, especially targeting lower GHG emissions.
Consistently, Lok’nStore have reported on Scope 1&2
emissions, water consumption and waste as a base point
for environmental reporting.
In the table below it is clear that since 2005 Lok’nStore
has made a series of impactful decisions to reduce its
environmental footprint prior to the known importance
of Net Zero. Similarly, the graph below shows how
Lok’nStore’s emissions would look if the same
environmental decisions of 2005 had been continued
over the 16 years alongside its current portfolio of stores.
Impact
Number of Stores
2005
19
2022
40
Increase or decrease % Result
Operational GHG Emissions
(scope 1 and 2)
Direct Operational GHG
Emissions (Scope 1)
Indirect Operational GHG
Emissions (Scope 2)
1,189 metric tonnes CO2e
89 metric tonnes CO2e
92.5% decrease
212 metric tonnes CO2e
89 metric tonnes CO2e
58% decrease
977 metric tonnes CO2e
0 metric tonnes CO2e
100% decrease
Water Consumption
5,143m3
2,356m3
54% decrease
Total Waste
913 metric tonnes
73 metric tonnes C
92% decrease
Renewable Energy
Generation
0 stores with PV
21 stores with PV
2005 VS 2022 96.5% Reduction in GHG Emissions
How it could have been – if Lok’nStore had taken no action to limit it’s impact on the environment
e
2
O
C
s
e
n
n
o
t
c
i
r
t
e
M
3,000
2,500
2,000
1,500
1,000
500
0
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
If Lok’nStore made no environmental changes
Lok’nStore Actual Outcome
49
Strategic ReportOverviewEnvironmental and SocialGovernanceFinancial Statements
Social Matters
Our Team
At 31 July 2022 we had 178 employees (2021: 171
employees). We treat our employees with dignity and
respect and are committed to providing a positive
attitude and an enjoyable working environment. We
have a professional open and customer 1st focused
culture. Colleagues can exchange ideas, share best
practice and offer suggestions for improvement through
regular meeting with managers and directors. Our
Central Support Team are visiting and in daily telephone
communication with our store colleagues to promote
the Company objectives, review performance, celebrate
success and manage risk factors.
We encourage our team members to build on their
skills, through the Lok’nStore Academy and regular
performance reviews. Training courses and team
meetings are held regularly at the Group’s head office
and our store colleagues are joined for lunch by our
Central Support team, Head Office colleagues and the
Executive Directors. This gives the senior management
team an opportunity to monitor and assess the culture
throughout the business.
Social Initiatives
Comment
We promote and underpin our customer 1st
focused culture and celebrate success constantly
through a variety of channels including regular email
communication to colleagues, through the Lok’nStore
intranet and through monthly bonus letters sent to all
store colleagues. All of these are fully branded and use
positive language to promote company values.
Remuneration of all Group colleagues is reviewed
annually to ensure all of our employees are paid fairly and
to ensure we can attract and retain the correct talent to
support our expansion.
The Board would like to thank all colleagues for
their commitment to our customers and for their
hard work and efforts over the year.
Employee Benefit Trust
The Employee Benefit Trust owns 623,212 shares
(2021: 623,212 shares), the costs of which are shown
as a deduction from shareholders’ funds. Full details
are provided in note 28 – Own Shares.
Bonus Schemes
Opportunity to buy
and receive Shares
Colleague Engagement
Activities
We are delighted to say that all of our colleagues continue to benefit from
the success of the business through our bonus schemes. During the year,
we paid over £0.73 million in bonuses to those colleagues.
Lok’nStore has a share incentive plan (SIP) which all employees are eligible to
participate in. 72% of our employees are enrolled members of our share scheme,
with 46% of employees being investing members.
Colleagues are given the opportunity to take part in internal competitions run via
our engaging intranet. We also celebrate company and individual successes
throughout the year.
Annual Party
Lok’nStore hosts an annual party for all colleagues to attend.
Internal Progression Routes
At Lok’nStore, we aim to fill most positions through internal promotions.
55% of our current store managers have been promoted internally.
Development and Training
All colleagues are supported to learn and develop through internal and
external training. We provide internal training workshops, process update
training as well as apprenticeships and National Vocational Qualification.
The Lok’nStore Environmental Committee
In recent years we have introduced an Environmental Committee that meets quarterly to review and discuss practical
steps we can take as a business to further reduce our impact on the environment. The committee members consist
of stakeholders at all levels of the business whose roles all have a direct link to our environmental performance.
The Environmental Committee includes two Executive Board Directors and a Non-Executive Director, Simon Thomas,
who has special responsibility on the Board for environmental matters. We regularly discuss our successes and
environmental projects with colleagues through internal communications. This gives all employees the opportunity
to raise ideas of how we can further improve our environmental performance and the engagement with all areas of
the business.
50
Lok’nStore Group plc Annual Report and Accounts 2022 The Lok’nStore Academy
The Lok’nStore Academy continues to bring strategic and operational
benefits to the business, aligning our training under one branded
project, providing personal development opportunities to all of our
team members. During the year the Academy offered a number of
training courses which have been delivered via virtual training sessions.
Our continuing growth and dynamic pipeline of new stores allows our
colleagues to grow as the business grows.
Development of our teams through the Academy supports our strategic
aim to fill future Store Manager roles internally. Today 55% of our Store
Managers are internal appointments having all developed from a
Customer Service Assistant role. We aim to improve this percentage as
the business grows, giving us committed and talented team members at
the customer-facing heart of our business. The Academy encompasses
all in-house training and quality audits such as our monthly mystery shop
programme and standards audits and performance reviews.
Health and Safety
The Board recognises the prime importance of
maintaining high standards of Health and Safety and
healthy working conditions for our teams, customers,
visitors, contractors, and other people who may be
affected by our business activities. Lok’nStore has a
Property Risk Committee which meets periodically and
considers issues relevant to Health and Safety and other
risk issues within the Group, under the overall supervision
of Ray Davies, Finance Director, who carries Board
responsibility for risk management.
The Health and Safety policy is reviewed by the
Committee on an annual basis. It is also amended to
include changes to Health and Safety Law as they occur.
The Health and Safety policy clearly sets out the duties
and responsibilities of the Managing Director, managers,
and all colleagues within the Group.
The Strategic Report as set out in pages 12 to 43 was
approved by the Board of Directors and authorised for
issue on 28 October 2022 and signed on its behalf by:
Andrew Jacobs
Ray Davies
Executive Chairman
Finance Director
28 October 2022
28 October 2022
Our Customers
We believe in clarity and transparency when
communicating with our customers. Our website is
informative yet engaging and, where necessary, clearly
explains our terms of business without hiding anything
in the small print. We are open and honest about our
products and services and do not employ pressure
selling techniques or attempt to take advantage of
any vulnerable groups. If we make a mistake, we
acknowledge it, deal with the problem quickly and learn
from our error. We listen to our customers as we know
that they can help us improve our service to them. In
return a substantial amount of our business comes from
previous customers, existing customers taking more
space and customer referrals.
Our Suppliers
We are committed to conducting our business with
suppliers in a fair and honest manner, with openness
and integrity, operating in accordance with the terms
and conditions agreed upon. We expect our suppliers
to operate to these same principles.
Policy on Payment of Suppliers
The Group does not follow any formal code or standard
on payment practice. The Company’s policy, which
is also applied by the Group, is to ensure that, in the
absence of dispute, all suppliers are dealt with in
accordance with standard payment practice, whereby
all outstanding trade accounts are settled within the
terms agreed with the supplier at the time of the supply
or otherwise, 30 days from invoice date. At the year-end
the credit taken from suppliers by the Group was 39 days
(2021: 39 days).
51
Strategic ReportOverviewEnvironmental and SocialGovernanceFinancial Statements 52
Lok’nStore Group plc Annual Report and Accounts 2022 Governance
54 Board of Directors and Advisers
56 Corporate Governance
63 Directors’ Report
66 Remuneration Report
68
69
Statement of Directors’ Responsibilities
Independent Auditor’s Report to the
Members of Lok’nStore Group plc
LANDMARK STORE
WOLVERHAMPTON
52,100
SQUARE FEET OF MAXIMUM
LETTABLE AREA
NOW
OPEN
OPEN
Lok’nStore Wolverhampton is a Landmark five storey
facility which sits on the leading road to the very
large Bentley Bridge destination retail park.
Adjacent to food, retail and leisure uses the store is well
located to serve the large population around it.
Developed for a management services client Lok’nStore will
receive high quality income from the store’s performance.
In return the managed services client will benefit from
Lok’nStore’s excellent operational expertise.
Early trading has been very good.
53
Strategic ReportOverviewEnvironmental and SocialGovernanceFinancial Statements Board of Directors and Advisers
EXECUTIVE DIRECTORS
Andrew Jacobs (63)
Executive Chairman
Ray Davies (65)
Finance Director
Neil Newman-Shepherd (45)
Managing Director
Experience
Andrew established Lok’nStore 27
years ago after eight years working in
the Japanese equity market. Andrew
is responsible for strategy, corporate
finance, and property. He has an MPhil
in Economics from Cambridge University
and a BSc in Economics from LSE.
Experience
Ray is a Fellow of the Institute of
Chartered Accountants and a Fellow
of the Institute of Chartered Secretaries
and Administrators. Prior to joining
Lok’nStore in 2004, Ray held several
senior finance positions in listed
companies in the construction,
health and fitness sectors.
Experience
Neil joined the Lok’nStore Group in
October 2006 becoming Sales Director
in November 2015. Prior to joining
Lok’nStore, Neil gained retail experience
at Wickes and Woolworths plc. Neil
is responsible for sales, operations,
marketing and people.
Key Areas of Expertise
Strategy, corporate finance, economics,
and property.
Key Areas of Expertise
Finance and accounting, corporate
reporting, risk management, legal,
tax and compliance.
Key Areas of Expertise
Sales, marketing, and human resource
management.
DIRECTORS
The Board of Directors is supported by an Assistant Company Secretary who assists the Chairman with the setting
of meeting agendas and provides the information to the Board members prior to the meetings. A procedure to
enable Directors to take independent professional advice if required has been agreed by the Board and formally
confirmed by all Directors.
A. Jacobs
R.A. Davies
N. Newman-Shepherd
J. Woyda
S.G. Thomas
R.J. Holmes
C.P. Peal
E.T.D. Luker
C
C
Executive Chairman
Finance Director
Managing Director
Independent Senior Non-Executive Director (Appointed 1 September 2021)
Non-Executive Director
Non-Executive Director
Non-Executive Director
Retired as Director and Senior Non-Executive Director December 2021
Audit Committee
Remuneration Committee
C
Chairman
Find out more about the Company’s
committees on page 62.
54
Lok’nStore Group plc Annual Report and Accounts 2022 THE BOARD HAS OVER 100 YEARS OF SELF-STORAGE EXPERIENCE
NON-EXECUTIVE DIRECTORS
Jeff Woyda (60)
Senior Independent
Non-Executive Director
Experience
Jeff joined the Board on
1 September 2021 as an
independent Non-Executive
Director. During his extensive
and varied career Jeff, a
qualified accountant, has held
a number of senior executive
positions and is currently Chief
Financial Officer and Chief
Operating Officer of Clarkson
plc, a FTSE 250 company and
the world’s leading provider of
integrated shipping services
and investment banking
capabilities to the shipping
and offshore markets.
Key Areas of Expertise
Finance and technology,
strategic development,
financial management,
investor relations and
corporate governance.
Simon Thomas (62)
Non-Executive Director
Richard Holmes (62)
Non-Executive Director
Charles Peal (67)
Non-Executive Director
Experience
Richard joined Lok’nStore
in 2000 having held senior
marketing and commercial
roles in Unilever, Boots
as Marketing Director
and Commercial Director
and latterly Specsavers
as Group Marketing Director.
Experience
Charles joined Lok’nStore
in 2007. Charles started his
career in 1977 at 3i Group, the
leading UK quoted Venture
Capital Company. He was
Chief Executive of Legal and
General Ventures from 1988
to 2000 and has served on
several boards since then.
Experience
Simon joined Lok’nStore in
1997 following successful
careers in the publishing and
finance sectors. He worked
at Reed International, Swiss
Bank Corporation, Nomura
International and co-founded
the emerging markets
investment trust business at
LCF Edmond de Rothschild.
Simon is particularly interested
in environmental economics
and natural capital.
Key Areas of Expertise
Corporate finance and
environmental performance.
Key Areas of Expertise
Marketing including digital
marketing and customer
experience
Key Areas of Expertise
Capital Markets and
Fund Management.
ADVISERS
In addition, the Board is advised by:
Secretary and Registered Office: Dentons Secretaries Limited, One Fleet Place, London, EC4M 7WS
Nominated Adviser and Brokers: finnCap Limited, One Bartholomew Close, London, EC1A 7BL
Nominated Adviser and Brokers: Peel Hunt LLP, 100 Liverpool Street, London, EC2M 2AT
Statutory Auditor: RSM UK Audit LLP, 25 Farringdon Street, London, EC4A 4AB
Registrars: Link Group, 10th Floor, Central Square, 29 Wellington Street, Leeds, LS1 4DL
Solicitors: Dentons, UKMEA LLP, One Fleet Place, London, EC4M 7WS
Solicitors: RWK Goodman, LLP, 69 Carter Lane, London, EC4V 5EQ
Solicitors: Russell-Cooke, 2, Putney Hill, London, SW15 6AB
Direct and Indirect Tax Advisors: BDO LLP, 55 Baker Street, London, W1U 7EU
To find out more visit:
www.loknstore.com/
investors/the-board
55
Strategic ReportOverviewEnvironmental and SocialGovernanceFinancial Statements
Corporate Governance
Corporate Governance Statement
The Board of Lok’nStore Group plc has always sought to operate the highest level
of governance standards appropriate to the size and nature of the Company.
The Group applies the Quoted Companies Alliance’s
Corporate Governance code (‘QCA Code’).
As Chairman it is my responsibility to ensure the
Company complies with the QCA Code and where the
Company deviates to explain why the Directors believe
this to be in the best interests of the Company. In this
section, we demonstrate our Company’s good corporate
governance structure and, where our practices differ
from the expectations set by the QCA Code, why they do
so. You can find more information including our reporting
directly referenced to the ten principles of the QCA code
on the corporate governance page in the investor section
on our website. These are also summarised below and
referenced to the relevant content within the Annual
Report.
Our Governance Structure
THE BOARD
Sets the strategic direction of the business
Oversees the internal control of the Group and its risk management
Approves the annual business Plan of the Group
Approves the Group’s financing structure
Remuneration Committee
Audit Committee
Meets once a year, chaired by Jeff Woyda
Meets three times a year, chaired by Charles Peal
• Setting, reviewing and recommending the policy
on the remuneration of the Executive Directors
• Overseeing the senior management team and
general workforce remuneration approach
• Monitoring the implementation of the Remuneration Policy
• Overseeing the alignment of reward, incentives and culture
• Overseeing the Group’s financial reporting
• Overseeing the Group’s internal control
framework and risk management process
• Overseeing the relationship with the external
auditors and monitoring their independence
See page 62 for more information
See page 62 for more information
Considers: Management Accounts, Store Operations and Performance, Human Resources and Capital Expenditure and are responsible for:
EXECUTIVE BOARD COMMITTEE
Meets Monthly
• Implementing the Group’s business plan and strategy
• Managing the risk of the business
• Managing and driving the financial performance of the business
• Approving site and store acquisitions and major items of capital expenditure
Property Committee
Meets Weekly
Considers:
Sites under Development
New Acquisitions
Property Risk Committee
Environmental Committee
Meets Periodically
Considers:
Risks Associated with
Properties including HSE
Meets Periodically
Considers:
Emerging environmental issues,
including environmental risks, and their
impact on the Group’s business
Monitors environmental and
sustainability performance
OPERATIONAL MANAGEMENT
Day to Day Business Delivery
56
Lok’nStore Group plc Annual Report and Accounts 2022
QCA Code Principle
Reporting Location
Compliant
With Code
1 Establish a strategy and business
model which promote long-term
value for shareholders.
Our business model is set out on pages 16 to 17 and our strategic
objectives and achievements in the year are set out on page 18.
The principal risks associated with the business model are set out
in the Principal Risks and Uncertainties section on pages 40 to 43.
2 Seek to understand and meet
shareholder needs and expectations.
Under Shareholder Relations on page 61 we discuss how we
seek to understand and meet shareholder needs and expectations.
Andrew Jacobs, Executive Chairman, is responsible for
shareholder liaison.
3 Take into account wider stakeholder
and social responsibilities and their
implications for long-term success.
How we work with and take into account wider stakeholder interests
is detailed in the Environmental and Social Section on pages 44 to 51.
4 Embed effective risk management,
considering both opportunities and
threats, throughout the organisation.
Our approach to risk management is detailed on page 40 and our
principal risks are outlined on pages 41 to 43. Our approach to
internal control and specifically internal audit is set out on page 58.
5 Maintain the Board as a well-functioning,
balanced team led by the Chair
The Board structure is reported on pages 58 to 62. Our committees
are detailed in this section of the annual report but can also be found
on our website: https://www.loknstore.co.uk/investors/
6 Ensure that between them the Directors
have the necessary up-to-date
experience, skills, and capabilities
Our Directors’ biographies can be found on pages 54 to 55 and
further information on the balance of skills and capabilities within
our Board can be found in the commentary on Board Evaluation
on page 60.
7 Evaluate Board performance based on
clear and relevant objectives, seeking
continuous improvement
We set out this year’s information in the Corporate Governance
section on page 60.
8 Promote a corporate culture that is
Please see our Environmental and Social matters on pages 44 to 51.
based on ethical values and behaviours
9 Maintain governance structures and
processes that are fit for purpose
and support good decision-making
by the Board
Please see the Corporate Governance Section from page 52.
10 Communicate how the Company
is governed and is performing
by maintaining a dialogue with
shareholders and other relevant
stakeholders
Please see the Corporate Governance Section, specifically page 61.
Results of voting at our AGMs can be found on the announcements
page of our website: https://www.loknstore.co.uk/investors/
announcements/
57
Strategic ReportOverviewEnvironmental and SocialGovernanceFinancial Statements Corporate Governance continued
Internal Control
The Board is responsible for ensuring that the Group has
established and operates a system of internal control. In
this context, internal control is defined as those policies
and processes established to ensure that business
objectives are achieved cost effectively, assets and
shareholder value are safeguarded, and laws, regulations
and policies are complied with. Controls can provide
reasonable but not absolute assurance that risks are
identified and adequately managed to achieve business
objectives and to minimise material errors, losses and
fraud or breaches of laws and regulations.
The Group operates a strict system of internal financial
control, which is designed to ensure that the possibility
of misstatement or loss is kept to a minimum. There is
a comprehensive system in place for financial reporting
and the Board receives a number of reports to enable it
to carry out these functions in the most efficient manner.
These procedures include the preparation of
management accounts, forecast variance analysis and
other ad hoc reports. There are clearly defined authority
limits throughout the Group.
The Group continues to develop the internal audit
function utilising operational management to make
unannounced store visits as part of a process supported
by audit control checklists and other procedures. This
undertaking has contributed to sales by promoting
efficient store management, but also addresses risk
and credit control, cash and store banking, and space
and customer management. The internal audit checks
are designed to ensure any fraud or mismanagement
is quickly identified. The Group has a whistle-blowing
procedure within its employee handbook, which is issued
to all colleagues. All employees may raise concerns
about malpractice or improper or potentially illegal
behaviour in confidence without concern of victimisation
or disciplinary action.
The Board
Three Executive Directors and Four Non-Executive Directors
Meets:
Considers:
Receives:
Meets regularly throughout
the year (9 times in the
current year). See page
60 for table recording
Board attendance.
• Financial strategy
• Detailed management accounts against budgets
• Company performance
• A current trading appraisal
• Major investments
• Minutes of all subcommittees
• Capital resources
• Risk management
• The Risk Register
• The Conflicts Register
• Reporting to shareholders
The Directors
The Board consists of three Executive Directors and
four Non-Executive Directors (following the retirement
of Edward Luker in December 2021). The expertise of
the Directors covers Company Law, Corporate Finance,
Economics, Finance and Accounting, Corporate
Reporting, Risk Management, Tax and Compliance,
Marketing, Operations, Property Law and Strategy.
Conflicts of Interest
The Directors have a responsibility to act in the best
interests of the Group and its shareholders and in keeping
with this responsibility it is imperative that Directors are
aware of and properly manage potential conflicts of
interest. The table below shows the directorships that
the Group Directors hold in other Companies and Trusts
both inside and outside the Group:
Activities
The Non-Executive Directors provide considerable
support to the Executive Chairman and while much of
this is via informal meetings, telephone calls and email
correspondence, the Non-Executive Directors also lend
their expertise and experience to other members of the
management team.
58
Lok’nStore Group plc Annual Report and Accounts 2022 Andrew Jacobs
Andrew Jacobs (UK) Limited
Andrew Jacobs LLP
Lok’nStore Limited*
The Box Room (Self-Storage) Ltd*
Ray Davies
Ash Road SS Limited
Davies Elise Consulting Limited
Lok’nStore Limited*
Lok’nStore Trustee Limited*
ParknCruise Limited*
Semco Engineering Limited*
Semco Machine Tools Limited*
Southern Engineering and Machinery Co. Limited*
The Box Room (Self-storage) Ltd*
Gypsy Moth Storage Limited
(formerly Chichester Storage Limited)
Broadstairs Storage Limited
Neil Newman-Shepherd
Lok’nStore Limited*
Jeff Woyda
Clarkson (Trustees) Limited
Clarkson Capital Ltd
Clarkson Dry Cargo Limited
Clarkson Holdings Limited
Clarksons Overseas Shipbroking Limited
Clarkson PLC
Clarkson Property Holdings Limited
Clarkson Research Holdings Ltd
Clarkson Research Services Limited
Clarkson Sale and Purchase Limited
Clarkson Shipbrokers Limited
Clarkson Shipbroking Group Limited
Clarkson Tankers Limited
Clarksons Platou Legal Services Limited
Clarksons Structured Asset Finance Ltd
H. Clarkson & Company Limited
Halcyon Shipping Ltd
J.O. Plowright & Co. (Holdings) Limited
LevelSeas Ltd
Maritech Development Limited
Maritech Holdings Limited
Maritech Limited
Maritech Services Limited
Seafix Limited
Overseas Directorships
Afromar Properties (PTY) Limited
Bonus Plus Investments Limited
Clarkson Logistics (HK) Limited
Clarkson Shipping Services Acquisition USA LLC
Clarkson Shipping Services India Private Limited
Clarksons Hong Kong Limited
Clarksons Norway AS
Clarksons Shipping Services USA LLC
Clarksons Singapore Pte. Limited
Clarksons (South Africa) (Pty) Limited
Clarksons USA Inc
Diligent Challenger Limited
Directorships held by Jeff Woyda
in the last five years
J.O. Plowright & Co. (Holdings) Limited
Clarksons Platou Securities Limited
Oilfield Publications Ltd
LNG UK PLC
Clarkson Logistics Limited
Clarksons Platou Futures Limited
International Transport Intermediaries Club Limited
Overseas
Clarksons Platou Asia Limited
Clarksons Platou AS
Clarksons Platou Asia Pte. Limited
Trusteeships
The Clarkson Foundation CIO
The Clarkson PLC Pension Scheme
J.O. Plowright & Co. (Holdings) Limited Pension and
Assurance Scheme
Simon Thomas
Lok’nStore Limited*
Simon Thomas (UK) Limited
Richard Holmes
Lok’nStore Limited*
Lok’nStore Trustee Limited*
Moorfield Eye Hospital NHS Foundation Trust
The Schiehallion Fund Limited**
Charles Peal
No other directorships
*
Lok’nStore Group Companies
** Guernsey registered company
59
Strategic ReportOverviewEnvironmental and SocialGovernanceFinancial Statements Corporate Governance continued
Conflicts of interest arise where an individual’s personal
interests or those interests related to legitimate outside
roles may conflict with the interests of the Group. This
could, for example, inhibit open discussions or lead to
a perception that the individual is acting outside of the
Group’s interests.
It is recognised that conflicts of interest will inevitably
occur from time to time and that Directors legitimately
undertake roles outside of the Group. The Board
therefore believes it is important to be transparent in
terms of such interests and to ensure they are properly
recorded and, where necessary, Directors will withdraw
from decision-making if there is a danger of conflict.
A register of interests is maintained by the Assistant
Company Secretary and is circulated to the Directors in
advance of each Board meeting. Conflicts of interest are
considered and authorised by the Board as they arise.
We report, in note 31, related party transactions.
Additionally, in the interests of transparency and in
compliance with the 2021 QCA Code (Provision 10)
include items which, while not strictly falling within
the definition of a related party transaction, are still
considered matters of interest. We therefore report
on the Lok’nStore Group plc dividends received by all
Directors, including Non-executive Directors, and do
not consider these to be material business relationships
which would impair their independence.
Board Evaluation and Composition
Board Attendance
Board Attendance during the year is set out in the table below. Meetings have often been a mix of physical attendees
with occasions when Directors have dialled in via Zoom in order to participate.
Board Attendance
Total Number of Meetings in 2021-2022
Executive Directors
Andrew Jacobs
Ray Davies
Neil Newman-Shepherd
Non-Executive Directors
Simon Thomas
Edward Luker (retired December 2021)
Charles Peal
Richard Holmes
Jeff Woyda
Board
Audit
Committee
Remuneration
Committee
Annual
General
Meeting
%
Attendance
9
9
9
8
9
4
9
9
8
3
n/a
n/a
n/a
n/a
2
3
n/a
n/a
1
n/a
n/a
n/a
n/a
1
n/a
1
n/a
1
1
1
1
1
1
1
1
1
100%
100%
89%
100%
100%
100%
100%
89%
The 2021 QCA Code expects companies to, ‘evaluate
Board performance based on clear and relevant
objectives, seeking continuous improvement’. Our
Executive Directors are evaluated on a quarterly basis
via the company’s senior management review system in
which objectives are set and performance against these
objectives is subsequently measured. Remuneration is
linked to these objectives and may include relevant
performance targets such as the number of new properties
acquired or revenue growth. Our Non-Executives were
evaluated informally within this year’s review of our Board
composition, and we report on this below.
The UK Corporate Governance Code’s requirement
is that a smaller company should have at least two
Non-Executive Directors that are deemed independent.
Following the retirement of Edward Luker, three of
our Non-Executive Directors have served for longer
than nine years and were therefore no longer deemed
independent under this Code. Our adopted code,
the Quoted Companies Alliance Code, takes a more
pragmatic approach stating that, ‘length of tenure does
not automatically affect independence’ and that the
Board should, ‘make a decision regarding such Director’s
independence.’
As part of our review of the Board composition this year
we looked at the ability of our Non-Executive Directors to
be objective, the experience each of our Non-Executive
Directors brings to the business and the contribution they
have made in the year.
60
Lok’nStore Group plc Annual Report and Accounts 2022 We established that the broad range of skills, expertise,
and attitude amongst the Executive and Non-Executive
Directors includes all the matters that the Company deals
with – strategy, property, finance, human resources,
marketing and organisation. Furthermore, the long
experience of Board Members continues to be considered
an asset and all express challenges freely and robustly.
We also met with potential Non-Executive Directors to
explore what expertise they might bring to the Board
and discussed the balance between new experiences
and increasing costs. After careful consideration we
concluded that although the current composition of
the Board remains effective it was in the best interest
of shareholders and the Company as a whole to
appoint a new independent Non-Executive Director
with the necessary skills and a wealth of knowledge
and experience held in senior roles across multiple
disciplines to contribute to the Group for its next stage
of growth. Accordingly, Jeff Woyda was appointed as an
independent Non-Executive Director on 1 September
2021. His biography details are set out in this Report
on page 55.
Although Non-Executive Directors who have served
over nine years must offer themselves for re-election
at every Annual General Meeting, and accordingly
Simon Thomas, Charles Peal and Richard Holmes
offer themselves for re-election at every AGM, the
Group considers the Non-Executive Directors to be
independent and therefore compliant with the Code.
Directors’ Remuneration
The Remuneration Committee consists of Jeff Woyda
(Chairman of the Committee) and Richard Holmes.
The Committee meets and considers, within existing
terms of reference, the remuneration policy and makes
recommendations to the Board for each Executive
Director. The Committee’s remuneration policy aims to
design a package that will align the interests of Executive
Directors and those of shareholders. The Executive
Directors’ remuneration consists of a package of basic
salary, bonuses and share options, which are linked to
corporate achievements and these levels are determined
by the Remuneration Committee.
Performance-related bonuses are calculated in accordance
with strict and measurable performance criteria. There
are no specific performance conditions relating to the
historic grant of share options beyond the share price
performance.
There are appropriate performance criteria which
apply for the grant of future share options to Directors
and senior managers in the business as part of their
participation in long-term performance awards in order
to meet the objectives of the business and accord with
accepted corporate governance.
The details of each Director’s remuneration are set
out in note 8 in the financial statements and in the
Remuneration Report on page 66. The Committee
meets once a year and considers proposals from the
Executive Chairman.
Shareholder Relations
We aim to provide balanced, clear and transparent
communications which allow our shareholders to
understand our performance, strategy and prospects.
Further aiding transparency is the fact that the Group
has a straightforward capital structure with only one
class of shares and one bank facility.
The Directors also meet and discuss the performance
of the Group with shareholders throughout the year with
specific schedules to visit institutional investors, analysts
and the media being held after the announcement of
the half-year and full-year results. At the AGM the Board
gives a presentation of events and progress during the
year. Attendee shareholders are encouraged to mix and
engage with the Directors after the formal business of the
AGM has concluded.
Regular Regulatory News Service announcements
(RNS) are made via the London Stock Exchange
throughout the year keeping all shareholders informed
about acquisitions, trading conditions, Director dealings
etc. Queries raised by a shareholder, either verbally or
in writing, are promptly answered by whoever is best
placed on the Board to do so.
Accounting Dates and
Reporting Calendar 2022
January
February
April
July
August
November
December
H1 Period-End
Pre-close Trading Statement (H1)
Interim Results announced
Financial Year-End
Pre-close Trading Statement
Preliminary Statement
AGM
61
Strategic ReportOverviewEnvironmental and SocialGovernanceFinancial Statements Corporate Governance continued
Accountability and Audit
The Board believes that the audited Annual Report
and Accounts play an important part in presenting all
shareholders with an assessment of the Group’s position
and prospects. The Strategic Report contains a detailed
consideration of the Group’s position and prospects.
Board Committees
The following section introduces the Group’s
committees, members and the terms of reference.
Nomination Committee
A Nomination Committee would oversee the appointment
of a new Director. Due to the relatively small size of the
Company, the Board does not believe that a Nomination
Committee is necessary. In the event of a proposal to
appoint a new Director, this is discussed at a full Board
meeting with each member being given the opportunity
to meet the individual concerned prior to any formal
decision being taken. Each member of the Board is
subject to the re-election provisions of the Articles of
Association, which require them to offer themselves
for re-election at least once every three years.
Remuneration Committee
The Remuneration Committee consists of Jeff Woyda
(Chairman of the Committee since January 2022
following Edward Luker’s retirement) and Richard
Holmes. The Committee meets once a year and
considers, within existing terms of reference, the
remuneration policy and makes recommendations
to the Board for each Executive Director. Further the
Committee considers proposals from the Executive
Chairman on the remuneration of the operational
management team especially in relation to bonus share
option awards under the long-term performance-related
pay schemes.
The Committee’s remuneration policy aims to design
a package that will align the interests of Executive
Directors and those of shareholders. The Executive
Directors’ remuneration consists of a package of basic
salary, bonuses and long-term performance-related pay
including share options, which are linked to corporate
achievements and these levels are determined by the
Remuneration Committee. The details of each Director’s
remuneration are set out in the Remuneration Report
on page 66 and more details are given in note 8 in the
financial statements.
Audit Committee
The Company has an Audit Committee, to whom
the external auditor, RSM UK Audit LLP, reports.
The Committee consists of Charles Peal (Chairman of
the Committee) and Jeff Woyda (since January 2022).
Charles Peal is the Committee’s Nominated Financial
Expert (for details of Charles’ experience please see his
biography on page 55). The Committee is responsible
for the relationship with the Group’s external auditor
and the review of the Group’s financial reporting and
internal controls.
The Committee meets prior to the announcement of
the Group’s financial results to consider the Auditor’s
Findings Report and consider any corresponding
recommendations. It also convenes to discuss and
review the findings of the external JLL Valuation Report
prior to the Group’s year-end results. The Committee
would also convene prior to the Group’s interim financial
results and at other times should it be necessary.
The Audit Committee also undertakes a formal assessment
of the auditor’s independence each year, which includes:
• a review of non-audit services provided to the Group
and related fees;
• discussion with the auditor of a written report
detailing all relationships with the Company and
any other parties that could affect independence
or the perception of independence;
• a review of the auditor’s own procedures for
ensuring the independence of the audit firm and
partners and team members involved in the audit,
including the regular rotation of the audit partner
every five years; and
• obtaining written confirmation from the auditor that,
in their professional judgement, they are independent.
An analysis of the fees payable to the external audit firm
in respect of both audit and non-audit services during
the year is set out in note 7 to the financial statements.
The Committee is satisfied that the external auditor
remains independent in the discharge of their audit
responsibilities. The Board will continue to review the
Company’s corporate governance and annual reporting
against the QCA Code and to implement appropriate
systems in order to support the Directors in executing
their responsibilities to all of the Company’s stakeholders.
On behalf of the Board.
Andrew Jacobs
Executive Chairman
28 October 2022
62
Lok’nStore Group plc Annual Report and Accounts 2022 Directors’ Report
The Directors submit their report and the audited
financial statements of the Company and of the
Group for the year ended 31 July 2022.
Principal Activity
The principal activity of the Group during the year was
that of providing self-storage and related services.
Review of the Business and
Future Developments
A detailed account of the Group’s progress during the year
and its prospects are set out in the Chairman’s Statement
on pages 4 to 8 and the Strategic Report on pages 12
to 43. The key performance indicators are set out in the
Highlights on page 2 and discussed in more detail in the
Financial Review on page 30 and the Managing Director’s
Review on page 19. Commentary on financial risk
management is included on page 40 and disclosures on
financial instruments are provided in note 17. The Carbon
energy reporting disclosures have been provided in the
Environmental Report on pages 45 to 49.
Going Concern
A review of the Group’s business activities, together with
the matters likely to influence its future development,
performance and its position in the wider market is set
out in the Strategic Report. The financial position of the
Group, its cash flows and borrowing facilities are shown
in the Statement of Financial Position, Statement of Cash
Flows and corresponding notes and policies contained
within the financial statements.
Further information concerning the Group’s objectives,
policies, its financial risk management objectives as well
as details of financial instruments and credit and liquidity
risk are also found in the Strategic Report and in the
notes to the financial statements (See note 17).
The Directors can report that, based on the Group’s
budgets and financial projections, which include a
recognition of the inflationary effect of rising costs and
the expected impact on the Group, they have satisfied
themselves that the business is a going concern.
The Group operates a Revolving Credit Facility of
£100 million. The increased facility continues to provide
funding for new Landmark site acquisitions to support
the Group’s ambitious growth plans. The facility is a joint
agreement with ABN AMRO N.V. and NatWest Bank
plc participating equally and runs until April 2026. The
interest rate is set at the Sterling Overnight Index Average
(SONIA) plus a 1.50%-1.75% margin based on a loan to
value covenant test. The Group is fully compliant with all
bank covenants and undertakings and is not obliged to
make any repayments prior to expiration. Further details
are provided in note 18 (Borrowings).
The Board has a reasonable expectation that the Company
and the Group have adequate resources and facilities to
continue in operational existence for the foreseeable future
based on Group cash balances of £46.5 million (2021:
£9.1 million), undrawn committed facilities at 31 July 2022
of £33.2 million (2021: £9.6 million) and cash generated
from operations of £18.6 million (2021: £12.2 million).
With interest rates rising, this risk per se is increasing,
however the Executive and the Board monitor this position
carefully through the Group’s detailed operating reports
produced on a weekly basis and detailed financial and
accounting reports produced on a monthly basis. The
Group’s bank covenant compliance is reviewed as part of
this process. The Bank’s senior interest covenant is tested
quarterly on a 12-month rolling basis.
The Group is fully compliant with all bank covenants and
undertakings and is not obliged to make any repayments
prior to expiration. The financial statements are therefore
prepared on a going concern basis.
Dividend
The Directors propose that a final dividend of 12.25
pence per share will be paid to the shareholders (2021:
10.67 pence per share). The total estimated dividend to
be paid is £3.6 million based on the number of shares in
issue at 14 October 2022 as adjusted for shares held in
the Employee Benefit Trust. This is subject to approval
by shareholders at the Annual General Meeting on
8 December 2022 and has not been included as a liability
in these financial statements. The ex-dividend date will be
24 November 2022; the record date 25 November 2022;
with an intended payment date of 6 January 2023. The
final deadline for Dividend Reinvestment Election (DRIP)
is 9 December 2022.
Events after the Reporting Date
Reportable events after the reporting date are set out in
note 34 in the financial statements.
Directors
The following Directors held office during the year
and subsequently:
A Jacobs
RA Davies
Executive Chairman
Finance Director
N Newman-Shepherd Managing Director
ETD Luker
SG Thomas
RJ Holmes
CP Peal
J Woyda
Senior Non-Executive
(Until 9 December 2021 before retiring)
Non-Executive
Non-Executive
Non-Executive
Senior Non-Executive
(1 January 2022 onwards)
63
Strategic ReportOverviewEnvironmental and SocialGovernanceFinancial Statements Directors’ Report continued
Details of the interests of the Directors in the shares
of the Company are set out below and details of their
remuneration are disclosed in note 8 of the financial
statements. Biographical details of the Directors are
set out on pages 54 and 55.
Reappointment of Directors
Richard Holmes and Charles Peal who have over 18
and 15 years tenure respectively as Non-Executives are
required to offer themselves for re-election at every AGM
and accordingly offer themselves for re-election at the
next AGM. Simon Thomas by virtue of his accumulated
tenure both as an Executive and a Non-Executive
Director also offers himself for re-election at the next AGM.
Ray Davies and Neil Newman-Shepherd new retire by
rotation and offer themselves for re-election
Edward Luker, the Senior Non-Executive Director, after
many dedicated years of service to the Group retired in
December 2021 and the Board has previously recorded
its appreciation of the significant contribution that he has
made to the business over his many years on the Board.
Jeff Woyda became Senior Independent Non-Executive
on 1 January 2022.
Directors’ and Officers’ Liability Insurance
The Company has liability insurance covering the Directors
and Officers of the Company and its subsidiaries.
Substantial Shareholdings
The Directors have been notified or are aware that the following are interested in 3% or more of the issued Ordinary
Share capital of the Company as at 14 October 2022:
Current
rank
% at
14 October
2022
Number of
shares
Total shares
in Issue
% at
15 October
2021
Number of
shares
Total shares
in issue
Andrew Jacobs
Canaccord Genuity Wealth
Management (inst)
Investec Wealth & Investment
Blackrock
Simon Thomas
Stonehage Fleming
Interactive Investor
Hargreaves Lansdown
Canaccord Genuity Wealth
Management (Retail)
Represents total shares in issue
1
2
3
4
5
6
7
8
9
17.34
5,203,600
17.52
5,203,600
9.02
7.36
5.07
4.77
3.41
3.36
3.04
2,706,550
2,207,997
1,552,510
1,430,000
1,023,569
1,007,354
912,593
3.02
905,570
8.42
4.38
6.67
5.14
3.47
3.63
3.41
2,500,000
1,300,454
1,979,376
1,525,000
1,030,235
1,079,020
1,013,602
30,008,099
29,692,749
64
Lok’nStore Group plc Annual Report and Accounts 2022 Political Donations
The Group made no political donations during the year
(2021: nil).
Corporate Governance
The Group’s statement on Corporate Governance can
be found in the Corporate Governance Report on pages
56 to 62. The Corporate Governance Report forms part
of the Directors’ Report and is incorporated into it by
cross-reference.
Annual General Meeting
The Board considers the Annual General Meeting
an important opportunity to present to shareholders
the Company’s performance and intends to hold its
Annual General Meeting at 5.30 pm on 8 December
2022 to be held at the offices of finnCap Group,
One Bartholomew Close, London EC1A 7BL.
Auditor
A resolution to reappoint RSM UK Audit LLP as auditor
will be put to the members at the Annual General
Meeting. A formal notice together with explanatory
circular and Form of Proxy will be sent to shareholders.
On behalf of the Board.
Ray Davies
Finance Director
28 October 2022
Market Valuation of Freehold Land
and Buildings
The changes in property, plant and equipment during
the year and details of property valuations at 31 July
2022 are shown in note 12(a) to the Financial Statements.
Further commentary on the property portfolio is contained
in the Property Review on page 26 and in the Financial
Review on page 30.
Share Buy-back Authority
Authority will be sought at the Company’s AGM on
8 December 2022 from shareholders to approve a
share buyback authority. The buy-back authority will
only be exercised in circumstances where the Directors
regard such purchases to be in the best interests of
shareholders as a whole.
Statement of Disclosure of Information to
the Auditor
The Directors who were in office at the date of approval
of these financial statements have confirmed that, as far
as they are aware, there is no relevant audit information
of which the auditor is unaware. Each of the Directors
has confirmed that they have taken all the steps that
they ought to have taken as Directors in order to make
themselves aware of any relevant audit information and
to establish that it has been communicated to the auditor.
Stakeholder Engagement
Effective engagement with stakeholders at Board
level and throughout our business is crucial to fulfilling
the Group’s strategic objectives. We continue to be
collaborative with all stakeholder groups including
customers, employees, suppliers, local authorities,
regulators, funders and investors. This approach
necessarily involves listening to and taking account
of their views and feedback, while also being open
to change.
65
Strategic ReportOverviewEnvironmental and SocialGovernanceFinancial Statements Remuneration Report
Although the Group is not required to set out a formal Remuneration Report, we set out
below the key components of the Directors’ remuneration in accordance with AIM Rule 19.
Base Salary: Provides competitive fixed remuneration
to retain key employees and reflect their level of skill,
experience and expertise, scope of responsibilities
and performance in the context of the role and set
by reference to the market.
Annual and Monthly Bonuses: Aligns reward
to key Group strategic objectives and drives
short-term performance.
Long Term Incentive Plan: Following strict
performance criteria aligns Executive Director interests
with those of shareholders and rewards achievement
of the long-term plan. (See below and note 24(b) of the
financial statements for details of the Scheme). Certain
senior managers who are in a position to significantly
influence the performance of the Group also participate
in the Scheme.
Directors’ Remuneration
All Employee Scheme: The Group operates an HMRC
approved Share Incentive Plan (SIP). This encourages
share ownership by all employees and allows them to
share in the long-term success of the Group. R Davies
and N Newman-Shepherd, Executive Directors, also
participate in this scheme.
Other Benefits: The benefits reported in the table below
all relate to medical insurance premiums paid on behalf
of the Directors. An additional benefit is Death in Service
Insurance typically at four times base salary (subject to
a cap of £0.5 million).
Service Contracts: Executive Directors’ service
contracts operate on a rolling basis without a specific
end-date providing for one year’s notice on the part
of the Company and six months’ notice on the part of
the employee. Non-Executive Directors do not have
service contracts with the Company but rather their
appointments are governed by letters of appointment.
Directors’
Remuneration 2022
Salary
£
Bonuses
£
Benefits
£
Sub Total
£
Pension
£
Gains on
Share Options
£
Total
£
Executive:
A Jacobs
RA Davies
N Newman-Shepherd
Non-Executive:
J Woyda
SG Thomas
RJ Holmes
ETD Luker
CP Peal
223,842
174,087
97,521
27,364
23,881
23,881
9,950
23,881
146,500
49,287
100,523
–
–
–
–
–
7,387
5,587
2,793
–
5,570
–
–
–
377,729
228,961
200,837
27,364
29,451
23,881
9,950
23,881
–
6,963
3,901
1,360,277
456,995
11,058
1,738,006
692,919
215,796
–
–
–
–
–
–
–
–
–
–
604,407
296,310
21,337
922,054
10,864
1,828,330
Directors’
Remuneration 2021
Salary
£
Bonuses
£
Benefits
£
Sub Total
£
Pension
£
Gains on
Share Options
£
Executive:
A Jacobs
RA Davies
N Newman-Shepherd
Non-Executive:
SG Thomas
RJ Holmes
ETD Luker
CP Peal
J Woyda
215,233
165,797
91,210
22,743
22,743
28,430
22,743
20,848
132,500
45,946
179,545
–
–
–
–
–
6,568
5,434
2,571
5,087
–
–
–
–
354,301
217,177
273,326
27,830
22,743
28,430
22,743
20,848
–
6,631
3,648
–
–
–
–
–
589,747
357,991
19,660
967,398
10,279
Details of the Directors’ remuneration is shown above.
–
–
–
14,436
–
–
–
–
14,436
66
27,364
29,451
23,881
9,950
23,881
2,761,248
Total
£
354,301
223,808
276,974
42,266
22,743
28,430
22,743
20,848
992,113
Lok’nStore Group plc Annual Report and Accounts 2022 The highest paid Director did not accrue any pension rights during the year. The benefits in kind all relate to medical
insurance premiums paid on behalf of the Directors. The number of Directors to whom retirement benefits are
accruing under money purchase pension schemes in respect of qualifying service is two (2021: two).
The following table shows a summary of the options held by Directors under all schemes. Refer to notes 22 to 25
for details.
Total at
31 July 2021
Options
Granted
Options
Exercised
Unapproved
Scheme
Approved
CSOP Share
Options
Total at
31 July 2022
2022
Executive Directors
A Jacobs – Unapproved
A Jacobs – PPP
A Jacobs total
RA Davies – Unapproved
RA Davies – CSOP
RA Davies – PPP
RA Davies total
206,087
160,000
366,087
246,977
7,742
160,000
414,719
N Newman-Shepherd – Unapproved
135,599
N Newman-Shepherd – CSOP
N Newman-Shepherd – PPP
N Newman-Shepherd total
8,618
240,000
384,217
–
(206,087)
40,000
40,000
–
(206,087)
–
200,000
200,000
–
–
38,236
38,236
–
–
59,422
59,422
(65,000)
181,977
(7,742)
–
(72,742)
–
(1,400)
–
198,236
380,213
135,599
7,218
–
299,422
(1,400)
442,239
–
–
–
–
2,941
–
2,941
–
964
–
964
–
200,000
200,000
181,977
2,941
198,236
383,154
135,599
8,182
299,422
443,203
All Directors total
1,165,023
137,658
(280,229)
1,022,452
3,905
1,026,357
The grant of options to Executive Directors and senior management is recommended by the Remuneration Committee
based on their contribution to the Group’s success. The options vest after two and a half, three or five years, subject
to the performance criteria attached to the options.
Unapproved Share Options – Long-Term Partnership Performance Plan (PPP)
On 2 July 2019, the Group adopted the Company Long-Term Partnership Performance Plan (PPP). The Plan is
a discretionary benefit offered by the Company for the benefit of selected key employees including Executive
Directors. Its main purpose is to increase the interest of the employees in the Group’s long-term business goals and
performance through share ownership. It contains specific performance criteria. Further details are set out in note
24(b) of the financial statements.
On behalf of the Board and signed on its behalf by:
Andrew Jacobs
Ray Davies
Executive Chairman
Finance Director
67
Strategic ReportOverviewEnvironmental and SocialGovernanceFinancial Statements
Statement of Directors’ Responsibilities
The Directors are responsible for preparing
the Strategic Report, the Directors’ Report,
and the financial statements in accordance
with applicable law and regulations.
Company law requires the Directors to prepare Group
and Company financial statements for each financial
year. The Directors have elected under company law
and are required by the AIM Rules of the London Stock
Exchange to prepare the Group financial statements in
accordance with UK adopted International Accounting
Standards and have elected under company law to
prepare the company financial statements in accordance
with UK adopted International Accounting Standards and
applicable law.
The Group and Company financial statements are
required by law and UK adopted International Accounting
Standards to present fairly the financial position of the
Group and the Company and the financial performance
of the Group. The Companies Act 2006 provides in
relation to such financial statements that references
in the relevant part of that Act to financial statements
giving a true and fair view are references to their
achieving a fair presentation.
Under company law the Directors must not approve
the financial statements unless they are satisfied that
they give a true and fair view of the state of affairs of
the Group and the Company and of the profit or loss
of the Group for that period.
In preparing each of the Group and Company financial
statements, the Directors are required to:
a. select suitable accounting policies and then apply
them consistently;
b. make judgements and accounting estimates that are
reasonable and prudent;
c. state whether they have been prepared in accordance
with UK adopted International Accounting Standards
and;
d. prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the
Group and the Company will continue in business.
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and
explain the Group’s and the Company’s transactions
and disclose with reasonable accuracy at any time the
financial position of the Group and the Company and
enable them to ensure that the financial statements
comply with the requirements of the Companies Act
2006. They are also responsible for safeguarding the
assets of the Group and the Company and hence for
taking reasonable steps for the prevention and detection
of fraud and other irregularities.
The Directors are responsible for the maintenance
and integrity of the corporate and financial information
included on the Lok’nStore Group plc website.
Legislation in the United Kingdom governing the
preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
68
Lok’nStore Group plc Annual Report and Accounts 2022 Independent Auditor’s Report
to the Members of Lok’nStore Group plc
Opinion
We have audited the financial statements of Lok’nStore
Group plc (the ‘Parent Company’) and its subsidiaries (the
‘Group’) for the year ended 31 July 2022 which comprise
the consolidated statement of comprehensive income,
the consolidated and company statements of change
in equity, the consolidated and company statements of
financial position, the consolidated statement of cash
flows and notes to the financial statements, including
significant accounting policies. The financial reporting
framework that has been applied in their preparation is
applicable law and UK-adopted International Accounting
Standards and, as regards the Parent Company financial
statements, as applied in accordance with the provisions
of the Companies Act 2006.
In our opinion:
•
•
the financial statements give a true and fair view of
the state of the Group’s and of the Parent Company’s
affairs as at 31 July 2022 and of the group’s profit for
the year then ended;
the Group financial statements have been
properly prepared in accordance with UK-adopted
International Accounting Standards;
•
•
the Parent Company financial statements have been
properly prepared in accordance with UK-adopted
International Accounting Standards and as applied
in accordance with the Companies Act 2006; and
the financial statements have been prepared in
accordance with the requirements of the Companies
Act 2006.
Basis for Opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable
law. Our responsibilities under those standards are
further described in the Auditor’s responsibilities for the
audit of the financial statements section of our report.
We are independent of the Group and Parent Company
in accordance with the ethical requirements that are
relevant to our audit of the financial statements in the
UK, including the FRC’s Ethical Standard as applied
to listed entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained
is sufficient and appropriate to provide a basis for
our opinion.
Summary of Our Audit Approach
Key audit
matters
Materiality
Group
• Valuation of property, plant and equipment
Parent Company
• None
Group
• Overall materiality: £916,000 (2021: £617,000)
Parent Company
• Overall materiality: £554,000 (2021: £469,000)
• Performance materiality: £687,000 (2021: £463,000)
• Performance materiality: £415,000 (2021: £351,000)
Scope
Our audit procedures covered 100% of revenue, 100% of total assets and 100% of profit before tax.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the
Group and Parent Company financial statements of the current period and include the most significant assessed
risks of material misstatement (whether or not due to fraud) we identified, including those which had the greatest
effect on the overall audit strategy, the allocation of resources in the audit and directing the efforts of the engagement
team. These matters were addressed in the context of our audit of the Group financial statements as a whole, and in
forming our opinion thereon, and we do not provide a separate opinion on these matters.
69
Strategic ReportOverviewEnvironmental and SocialGovernanceFinancial Statements Independent Auditor’s Report continued
to the Members of Lok’nStore Group plc
Valuation of property, plant and equipment
Key audit matter
description
At 31 July 2022 the fair value of freehold properties was £239.8m (2021: £199.6m). Disclosures relating to
the property valuations are included in note 12(a) in the financial statements.
How the matter
was addressed
in the audit
Property valuation is inherently subjective in nature and the Group employs external valuers to apply
professional judgement concerning market conditions and factors impacting the valuation of individual
freehold properties.
Fair values are calculated using actual and forecast inputs such as occupancy, capitalisation rates, maximum
lettable area, operating expenses and net revenue per square foot by property as at 31 July 2022.
We consider property valuation to be a Key Audit Matter due to the material nature of these assets to the
Group’s financial statements, the degree of subjectivity, complexity and estimation uncertainty inherent in
the valuation, and the allocation of resources in the audit.
Our approach to auditing the valuations included the following:
• We tested the integrity of the information provided to the external valuer by management by agreeing key
inputs such as actual occupancy and profitability to underlying records and source evidence;
• We evaluated the competence, capabilities, independence and objectivity of those preparing the external
valuation report;
• We assessed the scope of the work which the external valuer was requested to perform by management
and the valuation methodology applied;
• We discussed the valuations with the external valuer and challenged them on the key assumptions
applied. We focused on properties we identified as having significant or unusual valuation movements
(compared to underlying performance or previous periods);
• We utilised an independent auditor’s expert in property valuation to assist the audit team in assessing
the appropriateness of the valuation methodology adopted by the external valuer and in assessing the
assumptions applied to a sample of specific properties as instructed by the audit team;
• We benchmarked the valuations and valuation inputs to comparable businesses in the sector;
• We challenged management to justify the reasons for the significant uplift in value in the year, which
included challenge of the assumptions used in the model (particularly in respect of trading forecasts and
comparison of those forecasts to actual results); and
• We audited the disclosures relating to the property valuation, including disclosure of the critical estimates
and judgements made by management.
70
Lok’nStore Group plc Annual Report and Accounts 2022 Our Application of Materiality
When establishing our overall audit strategy, we set certain thresholds which help us to determine the nature, timing
and extent of our audit procedures. When evaluating whether the effects of misstatements, both individually and
on the financial statements as a whole, could reasonably influence the economic decisions of the users we take
into account the qualitative nature and the size of the misstatements. Based on our professional judgement, we
determined materiality as follows:
Group
Overall materiality
£916,000 (2021: £617,000)
Basis for determining
overall materiality
Profit-based formula with materiality representing
5.6% of “adjusted EBITDA” and 0.3% of total assets.
Rationale for
benchmark applied
“Adjusted EBITDA” is considered to represent the
underlying trading performance of the business and
is a key metric used by management. Profitability
also impacts the valuation of trading stores, which
represent the majority of total assets.
Performance materiality
£687,000 (2021: £463,000)
Parent Company
£554,000 (2021: £469,000)
10% of profit before tax
Benchmark is considered to represent
potential return to investors
£415,000 (2021: £351,000)
75% of overall materiality
Basis for determining
performance materiality
Reporting of misstatements
to the Audit Committee
75% of overall materiality
Misstatements in excess of £46,000 and
misstatements below that threshold that, in our
view, warranted reporting on qualitative grounds.
Misstatements in excess of £27,700
and misstatements below that threshold
that, in our view, warranted reporting on
qualitative grounds.
An Overview of the Scope of our Audit
The group consists of 8 components, all of which are
based in the UK.
• Reviewing covenant compliance calculations
• Reviewing the appropriateness of going concern
disclosures in the financial statements
Full scope audit procedures were completed on the
consolidated and parent company financial statements.
The scope of our audit covered 100% of revenue, 100%
of total assets and 100% of profit before tax included in
the consolidated financial statements and no component
auditors were used.
Subsidiaries that were subject to audit exemption were
audited to group materiality as part of the audit of the
consolidated financial statements.
Conclusions Relating to Going Concern
In auditing the financial statements, we have concluded
that the directors’ use of the going concern basis of
accounting in the preparation of the financial statements is
appropriate. Our evaluation of the directors’ assessment
of the Group’s and Parent Company’s ability to continue
to adopt the going concern basis of accounting included:
• Reviewing management’s going concern assessment
covering the 12 month period from the date of
approval of the financial statements
• Checking the mathematical accuracy of the
underlying financial model
• Assessing management’s sensitivity analysis, including
considering the impact on bank loan covenants
We concluded that the directors’ assessment was
appropriate in the circumstances and have no key
observations to make.
Based on the work we have performed, we have not
identified any material uncertainties relating to events
or conditions that, individually or collectively, may
cast significant doubt on the Group’s or the Parent
Company’s ability to continue as a going concern for a
period of at least twelve months from when the financial
statements are authorised for issue.
Our responsibilities and the responsibilities of the directors
with respect to going concern are described in the
relevant sections of this report.
Other Information
The other information comprises the information included
in the annual report, other than the financial statements
and our auditor’s report thereon. The directors are
responsible for the other information contained within the
annual report. Our opinion on the financial statements
does not cover the other information and, except to the
extent otherwise explicitly stated in our report, we do not
express any form of assurance conclusion thereon.
71
Strategic ReportOverviewEnvironmental and SocialGovernanceFinancial Statements Independent Auditor’s Report continued
to the Members of Lok’nStore Group plc
Our responsibility is to read the other information and,
in doing so, consider whether the other information is
materially inconsistent with the financial statements
or our knowledge obtained in the course of the audit
or otherwise appears to be materially misstated. If
we identify such material inconsistencies or apparent
material misstatements, we are required to determine
whether this gives rise to a material misstatement in the
financial statements themselves. If, based on the work
we have performed, we conclude that there is a material
misstatement of this other information, we are required
to report that fact.
We have nothing to report in this regard.
Opinions on Other Matters Prescribed
by the Companies Act 2006
In our opinion, based on the work undertaken in the
course of the audit:
•
•
the information given in the Strategic Report and the
Directors’ Report for the financial year for which the
financial statements are prepared is consistent with
the financial statements; and
the Strategic Report and the Directors’ Report have
been prepared in accordance with applicable legal
requirements.
Matters on which we are required
to Report by Exception
In the light of the knowledge and understanding of the
Group and the Parent Company and their environment
obtained in the course of the audit, we have not identified
material misstatements in the Strategic Report or the
Directors’ Report.
We have nothing to report in respect of the following
matters in relation to which the Companies Act 2006
requires us to report to you if, in our opinion:
• adequate accounting records have not been kept
by the Parent Company, or returns adequate for
our audit have not been received from branches
not visited by us; or
•
the parent company financial statements are not
in agreement with the accounting records and
returns; or
• certain disclosures of directors’ remuneration
specified by law are not made; or
• we have not received all the information and
explanations we require for our audit.
Responsibilities of Directors
As explained more fully in the directors’ responsibilities
statement set out on page 68, the directors are
responsible for the preparation of the financial statements
and for being satisfied that they give a true and fair view,
and for such internal control as the directors determine
is necessary to enable the preparation of financial
statements that are free from material misstatement,
whether due to fraud or error.
In preparing the financial statements, the directors
are responsible for assessing the Group’s and the
Parent Company’s ability to continue as a going
concern, disclosing, as applicable, matters related
to going concern and using the going concern basis
of accounting unless the directors either intend to
liquidate the Group or the Parent Company or to cease
operations, or have no realistic alternative but to do so.
Auditor’s Responsibilities for the
Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and
to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance but is
not a guarantee that an audit conducted in accordance
with ISAs (UK) will always detect a material misstatement
when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in
the aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the
basis of these financial statements.
The Extent to which the Audit was
Considered Capable of Detecting
Irregularities, Including Fraud
Irregularities are instances of non-compliance with
laws and regulations. The objectives of our audit are to
obtain sufficient appropriate audit evidence regarding
compliance with laws and regulations that have a direct
effect on the determination of material amounts and
disclosures in the financial statements, to perform audit
procedures to help identify instances of non-compliance
with other laws and regulations that may have a material
effect on the financial statements, and to respond
appropriately to identified or suspected non-compliance
with laws and regulations identified during the audit.
In relation to fraud, the objectives of our audit are to
identify and assess the risk of material misstatement of
the financial statements due to fraud, to obtain sufficient
72
Lok’nStore Group plc Annual Report and Accounts 2022 appropriate audit evidence regarding the assessed risks
of material misstatement due to fraud through designing
and implementing appropriate responses and to respond
appropriately to fraud or suspected fraud identified
during the audit.
• obtained an understanding of the nature of the
industry and sector, including the legal and regulatory
framework that the Group and Parent Company
operate in and how the Group and Parent Company
are complying with the legal and regulatory framework;
However, it is the primary responsibility of management,
with the oversight of those charged with governance,
to ensure that the entity’s operations are conducted in
accordance with the provisions of laws and regulations
and for the prevention and detection of fraud.
In identifying and assessing risks of material misstatement
in respect of irregularities, including fraud, the group
audit engagement team:
•
inquired of management, and those charged with
governance, about their own identification and
assessment of the risks of irregularities, including
any known actual, suspected or alleged instances
of fraud;
• discussed matters about non-compliance with
laws and regulations and how fraud might occur
including assessment of how and where the
financial statements may be susceptible to fraud.
The most significant laws and regulations were determined as follows:
Legislation/Regulation
Additional audit procedures performed by the audit engagement team included:
IFRS/UK-adopted IAS
and Companies Act 2006
Tax compliance
regulations
• Review of the financial statement disclosures and testing to supporting documentation; and
• Completion of disclosure checklists to identify areas of non-compliance.
• Inspection of advice received from tax advisors; and
• Consideration of whether any matter identified during the audit required reporting to an
appropriate authority outside the entity.
The areas that we identified as being susceptible to material misstatement due to fraud were:
Risk
Audit procedures performed by the audit engagement team:
Cut-off in revenue
recognition
• Testing the accuracy of the revenue recognised around the year end on a sample basis
through obtaining supporting documentation and performing re-calculations of revenue to be
recognised; and
• Testing a sample of one-off management fees to check that the period in which the conditions
for recognition were met.
Management override
of controls
• Testing the appropriateness of journal entries and other adjustments;
• Assessing whether the judgements made in making accounting estimates are indicative of a
potential bias; and
• Evaluating the business rationale of any significant transactions that are unusual or outside the
normal course of business.
A further description of our responsibilities for the audit
of the financial statements is located on the Financial
Reporting Council’s website at: http://www.frc.org.uk/
auditorsresponsibilities. This description forms part of
our auditor’s report.
Use of our Report
This report is made solely to the company’s members,
as a body, in accordance with Chapter 3 of Part 16
of the Companies Act 2006. Our audit work has been
undertaken so that we might state to the company’s
members those matters we are required to state to
them in an auditor’s report and for no other purpose.
To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the company
and the company’s members as a body, for our audit
work, for this report, or for the opinions we have formed.
Graham Ricketts (Senior Statutory Auditor)
For and on behalf of RSM UK Audit LLP,
Statutory Auditor
Chartered Accountants
25 Farringdon Street
London, EC4A 4AB
28 October 2022
73
Strategic ReportOverviewEnvironmental and SocialGovernanceFinancial Statements 74
Lok’nStore Group plc Annual Report and Accounts 2022 Financial
Statements
76 Consolidated Statement of
Comprehensive Income
77 Consolidated Statement of Changes in Equity
78 Company Statement of Changes in Equity
79 Consolidated and Company Statements
of Financial Position
80 Consolidated Statement of Cash Flows
81 Accounting Policies
91 Notes to the Financial Statements
123 Glossary
124 Our Stores
LANDMARK STORE
STEVENAGE
55,026
SQUARE FEET OF MAXIMUM
LETTABLE AREA
NOW
OPEN
OPEN
Lok’nStore acquired and developed this Landmark
location, situated in a prominent location on a busy
roundabout to the south of the town, where all the
traffic to the A1 as well as to and from the south of
the town passes.
This site neighbours a very busy Starbucks, BP petrol
station, as well as a number of offices and car dealerships.
This Landmark store with its striking design can be seen
from all and early trading has been great.
75
Strategic ReportOverviewEnvironmental and SocialGovernanceFinancial Statements Consolidated Statement of Comprehensive Income
For the year ended 31 July 2022
Revenue
Total property, staff, distribution, and general costs
Adjusted EBITDA1
Depreciation
Equity-settled share-based payments
Non-underlying items
Operating profit
Finance income
Finance cost
Profit before taxation
Income tax expense
Group
Year ended
31 July 2022
£’000
Notes
1
2
7
4
5
6
9
26,902
(10,553)
16,349
(4,727)
(201)
5,739
811
17,160
42
(1,328)
15,874
(3,796)
Group
Year ended
31 July 2021
£’000
21,892
(10,001)
11,891
(4,149)
(118)
(160)
(4,427)
7,464
1
(1,017)
6,448
(3,165)
Profit for the year attributable to Owners of the Parent
27a
12,078
3,283
Other comprehensive income
Items that will not be reclassified to profit and loss
Fair value movement in property valuation
Deferred tax relating to change in property valuation
Other comprehensive income
Total comprehensive income for the year attributable to
Owners of the Parent
Earnings per share attributable to owners of the Parent
Basic
Total basic earnings per share
Diluted
Total diluted earnings per share
1 Adjusted EBITDA is defined in the accounting policies section of the notes to this Report.
12
20
11
11
60,171
(14,284)
45,887
47,718
(18,224)
29,494
57,965
32,777
41.24p
11.33p
40.48p
11.10p
76
Lok’nStore Group plc Annual Report and Accounts 2022
Consolidated Statement of Changes in Equity
For the year ended 31 July 2022
Attributable to owners of the Parent
Share
Capital
£’000
Share
Premium
£’000
Other
Reserves
£’000
Revaluation
Reserve
£’000
Retained
Earnings
£’000
Total
Equity
£’000
31 July 2020
297
10,560
8,455
75,975
26,095
121,382
Profit for the year
Other comprehensive income:
Increase in property valuation net of deferred tax
Total comprehensive income for the year
Transactions with owners:
Dividend paid
Share-based payments
Transfers in relation to share-based payments
Deferred tax relating to share options
Exercise of share options
Reserve transfer on disposal of assets
Transfer additional depreciation on revaluation
net of deferred tax
Total transactions with owners
–
–
–
–
–
–
–
1
–
–
1
–
–
–
–
–
–
–
255
–
–
–
–
–
–
118
(26)
591
–
–
–
255
683
–
3,283
3,283
29,494
29,494
–
29,494
3,283
32,777
–
–
–
–
–
(165)
(568)
(733)
(3,865)
(3,865)
–
26
–
–
165
568
118
–
591
256
–
–
(3,106)
(2,900)
31 July 2021
298
10,815
9,138
104,736
26,272
151,259
Profit for the year
Other comprehensive income:
Increase in property valuation net of deferred tax
Total comprehensive income for the year
Transactions with owners:
Dividend paid
Share-based payments
Transfers in relation to share-based payments
Deferred tax relating to share options
Exercise of share options
Reserve transfer on disposal of assets
Transfer additional depreciation on revaluation
net of deferred tax
Total transactions with owners
–
–
–
–
–
–
–
3
–
–
3
–
–
–
–
–
–
–
576
–
–
–
–
–
–
201
(180)
(57)
–
–
–
–
12,078
12,078
45,887
45,887
–
45,887
12,078
57,965
(4,601)
(4,601)
–
–
–
–
–
–
180
–
–
(20,258)
20,258
(821)
821
201
–
(57)
579
–
–
576
(36)
(21,079)
16,658
(3,878)
31 July 2022
301
11,391
9,102
129,544
55,008
205,346
77
Strategic ReportOverviewEnvironmental and SocialGovernanceFinancial Statements Company Statement of Changes in Equity
For the year ended 31 July 2022
31 July 2020
297
10,560
15,650
1,912
28,419
Share
Capital
£’000
Share
Premium
£’000
Retained
Earnings
£’000
Other
Reserves
£’000
Total Equity
£’000
Profit and total comprehensive income for the year
Transactions with owners:
Equity settled share-based payments
Transfer in relation to share- based payments
Exercise of share options
Dividends paid
Total transactions with owners
–
–
–
1
–
1
–
–
–
255
–
255
4,793
–
4,793
–
26
(3,865)
(3,839)
118
(26)
–
–
92
118
–
256
(3,865)
(3,491)
31 July 2021
298
10,815
16,604
2,004
29,721
Profit and total comprehensive income for
the year
Transactions with owners:
Equity settled share-based payments
Transfer in relation to share-based payments
Exercise of share options
Dividends paid
Total transactions with owners
–
–
–
3
–
3
–
–
–
576
–
576
5,756
–
5,756
–
180
(4,601)
(4,421)
201
(180)
–
–
21
201
–
579
(4,601)
(3,821)
31 July 2022
301
11,391
17,939
2,025
31,656
78
Lok’nStore Group plc Annual Report and Accounts 2022 Consolidated and Company
Statements of Financial Position
31 July 2022
Company Registration No. 04007169
Assets
Non-current assets
Property, plant and equipment
Investments
Right of use assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Financial assets
Total current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Lease liabilities
Taxation
Non-current liabilities
Borrowings
Lease liabilities
Deferred tax
Total liabilities
Net assets
Equity
Equity attributable to owners of the Parent
Called up share capital
Share premium
Other reserves
Retained earnings
Revaluation reserve
Total equity
Group
31 July 2022
£’000
Group
31 July 2021
£’000
Company
31 July 2022
£’000
Company
31 July 2021
£’000
Notes
12a
13
12b
14
15
17c
16
19
18
19
20
21
26a/b
27a/b
292,848
255,652
–
10,424
303,272
143
3,988
46,465
–
50,596
353,868
(7,229)
(1,612)
(989)
(9,830)
(66,196)
(9,282)
(63,214)
(138,692)
(148,522)
205,346
301
11,391
9,102
55,008
129,544
205,346
–
10,503
266,155
290
4,273
9,105
509
14,177
280,332
(5,841)
(1,258)
(365)
(7,464)
(64,941)
(9,908)
(46,760)
(121,609)
(129,073)
151,259
298
10,815
9,138
26,272
104,736
151,259
–
2,871
–
2,871
–
28,785
–
–
28,785
31,656
–
–
–
–
–
–
–
–
–
–
2,670
–
2,670
–
27,051
–
–
27,051
29,721
–
–
–
–
–
–
–
–
–
31,656
29,721
301
11,391
2,025
17,939
–
31,656
298
10,815
2,004
16,604
–
29,721
As permitted by section 408 Companies Act 2006, the Parent Company’s statement of comprehensive income
has not been included in these financial statements. The profit and comprehensive income for the year ended
31 July 2022 was £5.8 million (2021: £4.8 million).
Approved by the Board of Directors and authorised for issue on 28 October 2022 and signed on its behalf by:
Andrew Jacobs
Executive Chairman
Ray Davies
Finance Director
79
Strategic ReportOverviewEnvironmental and SocialGovernanceFinancial Statements
Consolidated Statement of Cash Flows
For the year ended 31 July 2022
Operating activities
Cash generated from operations
Income tax paid
Net cash inflow from operating activities
Investing activities
Proceeds of sale & manage-back stores
Notes
29a
Proceeds of sale of land (net of disposal costs) – Wolverhampton
Proceeds of sale of land (net of disposal costs) – Southampton
Purchase of property, plant and equipment
12a
Interest received
Net cash generated by / (used in) in investing activities
Financing activities
Proceeds of bank borrowings utilised for store development and bank
refinancing
Finance costs paid including bank refinancing
Lease liabilities paid
Equity shares purchased for treasury (net of costs)
Equity shares sold from treasury (net of costs)
Equity dividends paid
Proceeds from issuance of Ordinary Shares (net)
Net cash (used in) / generated from financing activities
Net increase / (decrease) in cash and cash equivalents in the year
Cash and cash equivalents at beginning of the year
Cash and cash equivalents at end of the year
Group
Year ended
31 July 2022
£’000
Group
Year ended
31 July 2021
£’000
18,569
(1,060)
17,509
37,922
–
–
(11,961)
13
25,974
1,386
(1,741)
(1,746)
–
–
(4,601)
579
(6,123)
37,360
9,105
46,465
12,187
(800)
11,387
–
1,509
1,676
(26,474)
1
(23,288)
14,077
(969)
(1,559)
(693)
846
(3,865)
103
7,940
(3,961)
13,066
9,105
No statement of cash flows is presented for the Company as it had no cash flows in either year.
80
Lok’nStore Group plc Annual Report and Accounts 2022 Accounting Policies
General Information
Lok’nStore Group plc is an AIM listed company incorporated and domiciled in England and Wales. The address of
the registered office is One Fleet Place, London, EC4M 7WS, UK. Copies of this Annual Report and Accounts may
be obtained from the Company’s head office at 112 Hawley Lane, Farnborough, Hants, GU14 8JE or the investor
section of the Company’s website at http://www.loknstore.co.uk. The principal activities of the Group and the nature
of its operations are described in the Strategic Report.
Basis of Accounting
The financial statements for the year ended 31 July 2021 were prepared in accordance with international accounting
standards in conformity with the requirements of the Companies act 2006. The financial statements for the year
ended 31 July 2022 have been prepared in accordance with UK-adopted International Accounting Standards (IFRS)
as adopted by the UK Endorsement Board. This change in the basis of preparation is required by UK company Law
for the purpose of financial reporting as a result of the UK’s exit from the European Union on 31 January 2020. This
change does not constitute a change in accounting policy, rather a change in framework which is required to group
the use of IFRS into company law. There is no impact on the recognition, measurement or disclosure between the
two frameworks in the year reported.
The Group has applied all accounting standards and interpretations issued by the International Accounting Standards
Board and International Financial Reporting Interpretation Committee applicable to companies reporting under UK
adopted IFRS relevant to its operations and effective for accounting periods beginning on or after 1 August 2021.
There was no material impact on the adoption of these.
The statutory accounts for the year ended 31 July 2022 will be delivered to the Registrar of Companies following
the Company’s Annual General Meeting and will be available from the investor section of the Company’s website
at http://www.loknstore.co.uk.
The financial statements have been prepared on the historic cost basis except that certain trading properties and
non-current financial assets are stated at fair value.
Standards, Amendments, Improvements & Interpretations Applicable1
At the date of authorisation of these financial statements the following standards, which have not been applied in
these financial statements, were in issue but not yet effective.
Amendments to IFRS 4 Insurance Contracts – deferral of IFRS 9 (issued on 25 June 2020)
Effective Date –
P/c on or after
1 January 2021
Amendments to IFRS 16 Leases: Covid-19-Related Rent Concessions beyond 30 June 2021
(issued on 31 March 2021)
1 April 2021
1
The above standards have been endorsed by both the EU and the UK. EU-IFRS at 31 December 2020 were adopted for use within the UK
(from 1 January 2021) by Regulation 4 of Statutory Instrument 2019/685.
Endorsed Standards, Amendments, Improvements & Interpretations Available for Early
Adoption in the UK
Amendments to IFRS 3 Business Combinations; IAS 16 Property, Plant
and Equipment; IAS 37 Provisions, Contingent Liabilities and Contingent
Assets; and Annual Improvements 2018-2020 (All issued 14 May 2020)
Effective Date –
P/c on or after
1 January 2022
Endorsed
in the UK?
Y
Endorsed
in the EU?
Y
IFRS 17 Insurance Contracts (issued on 18 May 2017); including Amendments
to IFRS 17 (issued on 25 June 2020)
1 January 2023
Amendments to IFRS 17 Insurance contracts: Initial Application of IFRS 17
and IFRS 9 – Comparative Information (issued on 9 December 2021)
1 January 2023
Y
Y
Y
N
Not endorsed
Amendments to IAS 8 Accounting policies, Changes in Accounting Estimates
and Errors: Definition of Accounting Estimates (issued on 12 February 2021)
1 January 2023
Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice
Statement 2: Disclosure of Accounting policies (issued on 12 February 2021)
1 January 2023
N
Not endorsed
N
Not endorsed
Y
Y
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Strategic ReportOverviewEnvironmental and SocialGovernanceFinancial Statements
Accounting Policies continued
Endorsed Standards, Amendments, Improvements & Interpretations Available for Early
Adoption in the UK continued
The Directors do not anticipate that the adoption of these revised standards, amendments and interpretations
will have a significant impact on the figures included in the financial statements in the period of initial application.
Basis of Consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by
the Company (and its subsidiaries) made up to 31 July each year. Control is achieved where the Company has power over
the investee, exposure, or rights to variable returns from the investee and the ability to use its power to vary those returns.
Intra-group transactions, balances and unrealised gains and losses on transactions between Group companies are
eliminated on consolidation, except to the extent that intra-group losses indicate an impairment.
Going Concern
The Directors can report that, based on the Group’s budgets and financial projections, which include a recognition
of the inflationary effect on rising costs, on the Group, they have satisfied themselves that the business is a going
concern. The impact of rising costs and increasing bank interest rates and the measures the Directors have taken
to mitigate its effects are set out in the Managing Director’s Review on page 19.
The Board has a reasonable expectation that the Company and the Group have adequate resources and facilities to
continue in operational existence for the foreseeable future based on Group cash balances and cash equivalents of
£46.5 million (2021: £9.1 million), undrawn committed bank facilities at 31 July 2022, based on the Group’s facility of
£100 million, of £33.2 million (2021: £9.6 million – based on £75 million facility), and cash generated from operations
in the year ended 31 July 2022 of £18.6 million (2021: £12.2 million).
In October 2021, the Group executed the accordion arrangement embedded within the Revolving Credit Facility
which increases the facilities available to the Group to £100 million. In addition, the Group has also agreed a one-year
extension on its existing joint banking facility with National Westminster Bank/Royal Bank of Scotland plc and ABN
AMRO Bank N.V. The facility, which was due to expire in April 2025, will now run until April 2026 providing funding
for more Landmark site acquisitions to support the Group’s ambitious growth plans.
With interest rates rising, interest risk per se is increasing, however the Executive and the Board monitor this
position carefully through the Group’s detailed operating reports produced on a weekly basis and detailed financial
and accounting reports produced on a monthly basis. The Group’s bank covenant compliance is reviewed as part
of this process. The Bank’s senior interest covenant is tested quarterly on a 12-month rolling basis.
The Group is fully compliant with all bank covenants and undertakings and is not obliged to make any repayments
prior to expiration. The financial statements are therefore prepared on a going concern basis.
Revenue Recognition
The Group recognises revenue when the amount of the revenue can be reliably measured and when goods are sold, and
title has passed. Revenue from services provided is recognised evenly over the period in which the services are provided.
a) Self-storage Revenue
Self-storage revenue is recognised over the period for which the space is occupied by the customer on a time
apportionment basis. The price at which customers store their goods is dependent on size of unit and store location.
Customers are invoiced on a four-weekly cycle in advance and revenue is recognised based on time stored to
date within the cycle. When customers vacate, they are rebated the unexpired portion of their four weekly advance
payment (subject to a seven-day notice requirement). Revenue is recognised evenly over the period of self-storage.
b) Retail Sales
The Group operates a packaging shop within each of its storage centres for selling storage-related goods such as
boxes, tape and bubble-wrap. Sales include sales to the public at large as well as self-storage customers. Sales of
goods are recognised at point of sale when the product is sold to a customer.
82
Lok’nStore Group plc Annual Report and Accounts 2022 c) Insurance
Customers may choose to insure their goods in storage. The weekly rate of insurance charged to customers is
calculated based on the tariff per week for each £1,000 worth of goods stored by the customer. This charge is retained
by Lok’nStore and covers the cost of the block policy and other costs. Customers are invoiced on a four-weekly
basis for the insurance cover they use, and revenue is recognised based on time stored to date within the cycle.
The Group provides insurance to customers through a block policy purchased from its insurer. Block policyholders
supply VAT exempt insurance transactions as principals rather than insurance-related services as intermediaries and
accordingly insurance income received from the customer is recognised as revenue rather than offset against the
costs of the block policy. The key characteristics of a block policy are that:
• There is a contract between the block policyholder and the insurer which allows the block policyholder to effect
insurance cover subject to certain conditions.
• The Group acting in our own name as the block policyholder procures insurance cover for third parties from
the insurer.
• There is a contractual relationship between the block policyholder and third parties under which the insurance
is procured.
• The block policyholder stands in place of the insurer in effecting the supply of insurance to the third parties.
• The Group is not exposed to any insured losses arising from its insurance activity and therefore insurance risk.
d) Management Fee Income
Management fees earned for managing stores not owned by the Group are recognised over the period for which the
services are provided. Fees are invoiced monthly based on revenue performance. Additional performance fees may
be earned if an individual Managed Store’s EBITDA performance exceeds agreed thresholds. Periodic fees may also
be earned for additional specific services provided and are invoiced when that service has been completed. Revenue
is recognised for each performance condition once the condition has been met.
Segmental Information
In accordance with the requirements of IFRS 8 Operating Segments, the Group has reviewed its identifiable business
segments and the information used and provided internally to the Board, which is considered to be the Chief
Operating Decision Maker, in order to make decisions about resource allocation and performance management.
Financial information is reported to the Board with revenue and profit analysed between self-storage activity and
serviced archive and records management activity. All activities arise in the United Kingdom and the Group has
determined that there is one operating segment.
Adjusted EBITDA
Adjusted EBITDA is defined as EBITDA before losses or profits on disposal, share-based payments, acquisition costs,
and non-underlying items.
Operating Profit
Operating profit is defined as profit after all costs except finance income, finance costs and taxation.
Taxation
Income tax expense represents the sum of the current tax payable and deferred tax.
Current tax payable or recoverable is based on taxable profit for the year. Taxable profit differs from profit as reported
in the statement of comprehensive income because some items of income or expense are taxable or deductible in
different years or may not be taxable or deductible. The Group’s liability for current tax is calculated using tax rates
and laws that have been enacted or substantively enacted by the reporting date.
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Strategic ReportOverviewEnvironmental and SocialGovernanceFinancial Statements Accounting Policies continued
Taxation continued
Deferred tax is the tax which may be payable or recoverable in the future arising from the temporary differences
between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases
used in the computation of taxable profit. It is accounted for using the ‘balance sheet liability method’. Deferred tax is
provided in full on the differences between the revalued amount of trading property assets carried in the Statement
of Financial Position and their corresponding tax bases.
Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are
recognised to the extent that it is probable that taxable profits will be available against which deductible temporary
differences can be utilised except for when the taxable temporary difference is associated with interests in subsidiaries,
associates or joint ventures and the timing of the reversal can be controlled and it is probable that the temporary
difference will not reverse in the foreseeable future.
The carrying amounts of deferred tax assets are reviewed at each reporting date and reduced to the extent that it
is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or
the asset realised, based on tax rates that have been enacted or substantively enacted by the reporting date.
Tax is charged or credited to profit or loss, except when it relates to items charged or credited directly to other
comprehensive income, in which case the tax is also recognised directly in other comprehensive income.
Retirement Benefits
The amount charged to profit or loss in respect of pension costs is the contributions payable to money purchase
schemes in the year. Differences between contributions payable in the year and contributions actually paid are
shown as either accruals or prepayments in the statement of financial position. There are no defined benefits schemes.
Equity Settled Share-Based Payments
The cost of providing share-based payments to employees is charged to profit or loss over the vesting period of
the related share options. The cost is based on the fair value of the options determined at grant date using the
Black-Scholes pricing model, which is appropriate given the vesting and other conditions attaching to the options.
The charge is adjusted to reflect expected and actual levels of vesting.
Property, Plant and Equipment
Freehold properties are measured at fair value which represents the Group’s assessment of the highest and best
use of the asset. Gains or losses arising from the changes in fair value of the trading properties are included in Other
Comprehensive Income for the period in which they arise unless a decrease in fair value exceeds the cumulative
valuation surplus for a particular asset, in which case the excess is recognised in profit or loss. A comprehensive
external valuation is performed annually at each reporting date.
Short leasehold improvements, fixtures, fittings and equipment, and motor vehicles are carried at cost less
accumulated depreciation. Expenditure related to the improvement of the buildings is capitalised and depreciated
over the remaining period of the lease term.
Assets in the course of construction and land held for development of new stores (development property assets)
are carried at cost, less any recognised impairment loss. Depreciation of these assets (excluding land) commences
when the assets are ready for their intended use.
84
Lok’nStore Group plc Annual Report and Accounts 2022 Depreciation is provided on all property, plant and equipment other than freehold land and development property assets
at rates calculated to write each asset down to its estimated residual value evenly over its expected useful life as follows:
Freehold property
over 50 years straight line
Long leasehold property
over unexpired lease period or renewal term
Short leasehold improvements
over unexpired lease period or renewal term
Fixtures, fittings, and equipment
5% to 15% reducing balance
Computer equipment
Motor vehicles
over 2 years straight line
25% reducing balance
The assets’ residual values, useful lives and methods of depreciation are reviewed and adjusted if appropriate on an
annual basis. An item of property, plant and equipment is derecognised upon disposal or when no future economic
benefits are expected from its use or disposal.
The additional depreciation arising from the revaluation of freehold and long leasehold properties of £1,094,722
(2021: £710,593) is included within total depreciation on the face of the statement of comprehensive income and
transferred from the revaluation reserve to retained earnings each year.
Impairment of Property, Plant and Equipment
At each reporting date the Group reviews the carrying amounts of its property, and plant and equipment assets to
determine whether there is any indication that those assets have suffered an impairment loss. If any such indication
exists the recoverable amount of the asset is estimated in order to determine the extent, if any, of the impairment
loss. Where it is not possible to estimate the recoverable amount of an individual asset the Group estimates the
recoverable amount of the cash-generating unit to which the asset belongs. If the recoverable amount of an asset
or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or cash-
generating unit is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss.
Where an impairment loss is subsequently reversed, the carrying amount of the assets or cash-generating unit is
increased to the revised estimate of its recoverable amount, not to exceed the carrying amount that would have been
determined had no impairment loss been recognised for the asset or cash-generating unit in prior years. A reversal
of an impairment loss is recognised immediately in profit or loss.
Leases – the Group as Lessee
Initial and subsequent measurement of the right of use asset
A right of use asset is recognised at commencement of the lease and initially measured at the amount of the lease
liability, plus any incremental costs of obtaining the lease and any lease payments made at or before the leased asset
is available for use by the Group.
The right of use asset is subsequently measured at cost less accumulated depreciation and any accumulated
impairment losses. The depreciation methods applied are as follows:
• Leased property – on a straight-line basis over the shorter of the lease term or useful life.
The right of use asset is adjusted for any re-measurement of the lease liability and lease modifications, as set out below.
Initial Recognition of the Lease Liability
On commencement of a contract (or part of a contract) which gives the Group the right to use an asset for a period
of time in exchange for consideration, the Group recognises a right of use asset and a lease liability unless the lease
qualifies as a ‘short-term’ lease or a ‘low-value’ lease.
Where the lease term is 12 months or less and the lease does not contain an option to purchase the leased asset,
lease payments are recognised as an expense on a straight-line basis over the lease term.
For leases where the underlying asset is ‘low-value’, lease payments are recognised as an expense on a straight-line
basis over the lease term.
85
Strategic ReportOverviewEnvironmental and SocialGovernanceFinancial Statements Accounting Policies continued
Leases – the Group as Lessee continued
Initial Measurement of the Lease Liability
The lease liability is initially measured at the present value of the lease payments during the lease term discounted
using the interest rate implicit in the lease, or the incremental borrowing rate if the interest rate implicit in the lease
cannot be readily determined.
The lease term is the non-cancellable period of the lease plus extension periods that the Group is reasonably certain
to exercise and termination periods that the Group is reasonably certain not to exercise.
Lease payments include fixed payments, less any lease incentives receivable, variable lease payments dependant on
an index or a rate (such as those linked to SONIA) and any residual value guarantees. Variable lease payments are
initially measured using the index or rate when the leased asset is available for use.
Subsequent Measurement of the Lease Liability
The lease liability is subsequently increased for a constant periodic rate of interest on the remaining balance of the
lease liability and reduced for lease payments. Interest on the lease liability is recognised in profit or loss, unless
interest is directly attributable to qualifying assets, in which case it is capitalised in accordance with the Group’s
policy on borrowing costs.
Re-measurement of the Lease Liability
The lease liability is adjusted for changes arising from the original terms and conditions of the lease that change
the lease term, the Group’s assessment of its option to purchase the leased asset, the amount expected to be
payable under a residual value guarantee and/or changes in lease payments due to a change in an index or rate.
The adjustment to the lease liability is recognised when the change takes effect and is adjusted against the right
of use asset, unless the carrying amount of the right of use asset is reduced to zero, when any further adjustment
is recognised in profit or loss.
Adjustments to the lease payments arising from a change in the lease term or the lessee’s assessment of its
option to purchase the leased asset are discounted using a revised Discount Rate. The revised Discount Rate is
calculated as the interest rate implicit in the lease for the remainder of the lease term, or if that rate cannot be readily
determined, the Group’s incremental borrowing rate at the date of reassessment.
Lease Modifications
A lease modification is a change that was not part of the original terms and conditions of the lease and is accounted
for as a separate lease if it increases the scope of the lease by adding the right to use one or more additional assets
with a commensurate adjustment to the payments under the lease.
For a lease modification not accounted for as a separate lease, the lease liability is adjusted for the revised lease
payments, discounted using a revised Discount Rate. The revised Discount Rate used is the interest rate implicit
in the lease for the remainder of the lease term, or if that rate cannot be readily determined, the lessee company’s
incremental borrowing rate at the date of the modification.
Where the lease modification decreases the scope of the lease, the carrying amount of the right of use asset is
reduced to reflect the partial or full termination of the lease. Any difference between the adjustment to the lease
liability and the adjustment to the Right of use asset is recognised in profit or loss.
For all other lease modifications, the adjustment to the lease liability is recognised as an adjustment to the Right of
use asset.
Investments
Shares in subsidiary undertakings are considered long-term investments and are classified as non-current assets in
the Parent Company’s statement of financial position. All investments are stated at cost. Provision is made for any
impairment in the value of non-current asset investments.
86
Lok’nStore Group plc Annual Report and Accounts 2022 Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is determined on a first in, first out basis.
Net realisable value is based upon estimated selling prices less any costs of disposal. Provision is made for obsolete
and slow-moving items.
Financial Instruments
Financial assets and financial liabilities are recognised in the Statement of Financial Position when the Group
becomes a party to the contractual provisions of the instrument. IFRS 9 covers the classification, measurement
and derecognition of financial assets and liabilities.
The impairment model under IFRS 9 requires the recognition of impairment provisions based on expected credit
losses rather than only incurred credit losses. The significant financial assets held by the Group that are affected by
the impairment losses recognised under IFRS 9 are trade and other receivables.
The Company holds intercompany loan and receivables balances with the subsidiaries of the Group as disclosed in
note 15. The Directors do not estimate there to be a material impact on the Company only Financial Statements from
the recognition of impairment provisions for the loans and receivables.
Bank Borrowings and Finance Costs
Interest-bearing bank loans are recorded at the proceeds received net of direct issue costs. Issue costs are amortised
against the carrying value amount of the loan over the period of the loan with the cost recognised in profit and loss
as part of finance costs.
Borrowing costs are recognised in profit or loss in the year in which they are incurred, unless the costs are incurred
as part of the development of a qualifying asset, when they will be capitalised. A qualifying asset is an asset that
necessarily takes a substantial period of time to get ready for its intended use. Commencement of capitalisation
is the date when the Group incurs expenditure for the qualifying asset, incurs borrowing costs and undertakes
activities that are necessary to prepare the assets for their intended use. In the case of suspension of activities during
extended periods, the Group suspends capitalisation. The Group ceases capitalisation of borrowing costs when
substantially all of the activities necessary to prepare the asset for use are complete.
The Group has an active store development programme and in accordance with IAS 23 (Borrowing costs) has
material qualifying assets that take a substantial period of time to develop from acquisition to ultimate store opening.
Accordingly borrowing costs have been capitalised in the current year that are directly attributable to the acquisition,
construction and fit-out of these qualifying store assets. The Group funds these developments from a general bank
revolving credit facility and the capitalisation rate applied is the average cost of these funds. When an individual store
development is complete, and the store has opened capitalisation of attributable borrowing costs ceases. In the
current year £589,843 (2021: £380,193) interest was capitalised in respect of nine qualifying development assets.
Derivative Financial Instruments and Hedge Accounting
The Group’s activities expose it to interest rate risk. The Group has historically used interest rate swap contracts to
hedge these exposures. There were no financial derivatives held by the Group at 31 July 2022 or at 31 July 2021.
The Group does not use derivative financial instruments for speculative or for any other purposes.
The use of financial derivatives is governed by the Group’s policies as approved by the Board of Directors. The
Group documents its risk management objectives and strategy for undertaking hedging transactions within the
Group’s Risk Register. The Group also documents its assessment both at hedge inception and on an on-going basis
to assess whether the derivatives that are used are effective in offsetting changes in fair value or cash flows of the
hedged items.
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Strategic ReportOverviewEnvironmental and SocialGovernanceFinancial Statements Accounting Policies continued
Trade Receivables
For trade receivables, expected credit losses are measured by applying an expected loss rate to the gross carrying
amount. The expected loss rate comprises the risk of a default occurring and the expected cash flows on default
based on the ageing of the receivable. The risk of a default occurring always takes into consideration all possible
default events over the expected life of those receivables (the lifetime expected credit losses).
Trade receivables as indicated in note 15 are £1.20 million (2021: £1.45 million). As described in note 15 the Group’s
exposure to credit risk is low and the Group’s credit model is solid. The Directors have assessed the impact of
future impairment losses recognised for trade receivables under IFRS 9 at 31 July 2022 based on actual losses
experienced over the past five years and concluded that the impact on impairment losses recognised under IFRS 9
to be immaterial.
Liabilities and Equity
Financial liabilities and equity instruments issued by the Group are classified according to the substance of the
contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the
assets of the Group after deducting all of its liabilities and includes no obligation to deliver cash or other financial
assets. Equity instruments issued by the Group are recorded as the proceeds received, net of direct issue costs.
Interest-bearing loans and overdrafts are initially measured at fair value net of direct transaction costs and are
subsequently measured at amortised cost, using the effective interest rate method. Any difference between the
proceeds net of transaction costs and the settlement or redemption of borrowings is recognised over the term of the
borrowing. Trade and other payables are initially recognised at fair value and are subsequently stated at amortised
cost using the effective interest rate method.
Cash and Cash Equivalents
Cash and cash equivalents comprise cash and short-term deposits and other short-term highly liquid investments
that are readily convertible to a known amount of cash. The carrying amounts of these assets approximate to their
fair value and the risk of changes in value is not significant.
Financial Assets
Trade and other debtors and amounts due from Group undertakings which are receivable within one year and which
do not constitute a financing transaction are initially measured at the transaction price and subsequently measured
at amortised cost being the transaction price less any amounts settled and any impairment losses. Where the Group
is entitled to receive cash under a management services agreement at a future specified date this is recorded as
a financial asset at the current fair value of the cash ultimately receivable. Where this amount is receivable, in more
than one year, the financial asset is presented as a non-current asset. Where the amounts are now due and payable
and have been invoiced accordingly, the amount is treated as a debtor.
Financial assets are derecognised when the rights to receive cash flows have expired or have been transferred
and the consolidated entity has transferred substantially all the risks and rewards of ownership. When there is no
reasonable expectation of recovering part or all of a financial asset, its carrying value is written off.
Impairment of Financial Assets
A financial asset is credit-impaired when events that have a detrimental impact on the estimated future cash flows
of that financial asset have occurred.
The expected credit loss recognised in profit or loss for a credit impaired financial asset is the difference between
the asset’s gross carrying amount and the present value of estimated future cash flows discounted at the financial
asset’s original effective interest rate.
Net Debt
Net debt comprises the borrowings of the Group less cash and cash equivalents.
88
Lok’nStore Group plc Annual Report and Accounts 2022 Provisions
Provisions are recognised when the Group has a present obligation as a result of a past event which it is probable
will result in an outflow of economic benefits that can be reliably estimated.
Employee Benefit Trust
The Group operates an employment benefit trust and has de facto control of the shares held by the trust and bears
their benefits and risks. The Group records certain assets and liabilities of the trust as its own. Finance costs and
administrative expenses are charged as they accrue.
Own Shares
The cost of own shares held by the employee benefit trust (ESOP shares) and treasury shares is shown as a
deduction from retained earnings. Earnings per share are calculated on the net shares in issue.
Dividends
Dividends are recognised when declared during the financial year.
Critical Accounting Estimates a) and b) and Judgements c) and d)
The preparation of financial statements under IFRS requires management to make estimates and assumptions that
may affect the application of accounting policies and the reported amounts of assets and liabilities, income and
expenses. Actual outcomes may differ from these estimates and assumptions. The estimates and assumptions that
have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next
financial year are discussed below.
a) Estimate of Fair Value of Trading Properties
The Group commissions an external valuation of its self-storage stores. This valuation uses a discounted cash flow
methodology which is based on current and projected net operating income. Principal assumptions underlying
management’s estimation of the fair value are those relating to stabilised occupancy levels, expected future
growth in storage fees and operating costs, maintenance requirements, capitalisation rates and Discount Rates.
A more detailed explanation of the background and methodology adopted in the valuation of the Group’s trading
properties is set out in note 12(a) together with estimation sensitivities undertaken. The carrying value of land and
buildings held at valuation at the reporting date was £239.8 million (2021: £199.6 million) as shown in the table in
note 12(a).
b) Assets in the Course of Construction and Land Held for Store Development
(‘Development Property Assets’)
The Group’s development property assets are held in the statement of financial position at historic cost and are not
valued externally. In acquiring sites for redevelopment into self-storage facilities, the Group estimates and makes
judgements on the potential lettable storage space that it can achieve in its planning negotiations, together with the
time it will take to achieve maturity. In addition, assumptions are made on the storage fees that can be achieved at
the store by comparison with other stores within the portfolio and within the local area. These judgements, taken
together with estimates of operating costs and the projected construction cost, allow the Group to calculate the
potential net operating income at maturity, projected returns on capital invested and therefore justify the proposed
purchase price of the site at acquisition.
Following the acquisition, regular reviews are carried out taking into account the status of the planning negotiations,
and revised construction costs or capacity of the new facility, for example, to make an assessment of the recoverable
amount of the development property. The Group reviews all development property assets for impairment at each
reporting date in the light of the results of these reviews. Once a store is opened it is valued as a trading store.
The carrying value of development property assets at the reporting date was £29.2 million (2021: £33.7 million).
Please see note 12(a) for more details.
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Strategic ReportOverviewEnvironmental and SocialGovernanceFinancial Statements Accounting Policies continued
Critical Accounting Estimates a) and b) and Judgements c) and d) continued
c) Classification of Self-storage Facilities as Owner-occupied Properties Rather than
Investment Properties
The Directors consider that Lok’nStore Group plc is the Parent Company of a ‘Trading business’ and is not wholly or
mainly engaged in making investments.
The Group is an integrated storage solutions business offering a range of services to its customers. We provide
services to our customers under contracts for the provision of storage services which do not give them any property
or tenancy rights and a large number of the stores we operate are from properties where we do not own the land
or the buildings. The assets we do own are valued on the basis of the trading cash flows that the operating
businesses generate.
The Group continues to develop its managed stores’ business where it uses its operational and logistic expertise
to provide a full range of services to customers in stores we manage for third-party owners. In recent years the
Group has developed many new managed stores all of which are owned by third-party investors and managed
by Lok’nStore.
Previously owned sites at Woking, Ashford, Swindon, and Crayford, have been the subject of sale and manage-back
transactions by which Lok’nStore has retained the management of the business when a third-party owner acquired
the business, land and buildings. In this year another four trading stores were the subject of sale and manage-back
transactions by which Lok’nStore has retained the management of the business.
All of this trading activity, including active management and marketing activity, as well as the self-storage income
earned from our leasehold stores’ activity, demonstrate that the holding of land is not a core activity because the
trading operation is not dependent on the ownership of land. See the chart on page 26 for the changing ownership
structure of the stores.
The Group has always and continues to comply with all of the usual accounting and tax protocols consistent with a
trading business. As at the year-end, Lok’nStore operates 24 owned stores mainly in southern England, although in
recent years we have expanded our historically southern England focused geographic footprint into the Southwest
(Exeter), Wales (Cardiff) and the Northwest (Salford, Warrington, and Altrincham). Of the 24 stores, Lok’nStore
owns the freehold interest in 15 stores, nine of the stores are held under commercial leases. There are a further 16
managed stores operating under management contracts for third-party owners making a total of 40 stores trading
under the Lok’nStore brand.
One of the features of Lok’nStore’s strategy is to increase the number of stores we manage for third parties selling
our expertise in storage solutions management, operating systems and marketing, through management fees rather
than retaining a proprietary interest in land and buildings.
The classification of self-storage facilities as owner-occupied properties rather than investment properties has
resulted in the recognition of fair value gains in 2022 (net deferred of tax) of £45.9 million (2021: £29.5 million) in
Other Comprehensive Income rather than the Income Statement.
d) Application of IFRS 16
The Group uses judgement to assess whether the interest rate implicit in the lease is readily determinable. When the
interest rate implicit in the lease is not readily determinable, the Group estimates the incremental borrowing rate based
on its external borrowings secured against a similar asset, adjusted for the term of the lease.
90
Lok’nStore Group plc Annual Report and Accounts 2022 Notes to the Financial Statements
For the year ended 31 July 2022
1 Revenue
Analysis of the Group’s revenue is shown below:
Stores trading
Self-storage revenue
Insurance revenue
Retail sales (packing materials etc)
Total self-storage revenue – owned stores
Management fees – managed stores
Sub-total
Non-storage income
Total revenue per statement of comprehensive income
The Group has one operating segment, being self-storage in the UK.
2 Property, Staff and General Costs
Property and premises costs
Property rentals
Net property and premises costs
Staff costs
General overheads
Sub-total operating costs
Retail products cost of sales (see note 3)
Group
2022
£’000
21,585
2,239
252
24,076
2,785
26,861
41
26,902
Group
2022
£’000
5,304
(1,746)
3,558
5,369
1,438
10,365
188
10,553
Group
2021
£’000
18,165
2,079
285
20,529
1,346
21,875
17
21,892
Group
2021
£’000
4,783
(1,559)
3,224
5,269
1,341
9,834
167
10,001
3 Cost of Sales of Retail Products
Cost of sales represents the direct costs associated with the sale of retail products (boxes, packaging etc.), and the
ancillary sales of insurance cover for customer goods, all of which fall within the Group’s ordinary activities.
Retail
Insurance
Other
Group
2022
£’000
113
23
52
188
Group
2021
£’000
125
14
28
167
91
Strategic ReportOverviewEnvironmental and SocialGovernanceFinancial Statements 4 Non-underlying items
Profit on sale of trading stores1
Liquidated damages received on development2
Abortive site costs3
Profit on sale of land at Wolverhampton4
Loss on sale of vacant property at Southampton5
Group
2022
£’000
5,936
175
(372)
–
–
5,739
Group
2021
£’000
–
–
–
265
(425)
(160)
2022
1 Profit arising on the sale and manage-back of four trading stores located at Basingstoke, Cardiff, Horsham, and Portsmouth.
2
3
Liquidated damages received on the late delivery of a new store development which has subsequently opened.
The Group’s active search for suitable development sites for new Landmark stores has resulted in some abortive costs – mainly around planning and
associated professional costs.
2021
4
5
Profit on sale of land at Wolverhampton: During the period development land with the benefit of planning permission was sold on a sale and
manage-back basis.
In December 2020, we completed the sale of our vacant property in Southampton, Hampshire for £1.6 million (net of disposal costs) (Net Book Value
c. £2 million) eliminating over £150,000 p.a. of residual costs.
5 Finance Income
Bank interest
Interest receivable arises on cash and cash equivalents (see note 17).
6 Finance Costs
Bank interest
Non-utilisation fees
Bank loan arrangement fees
Interest on lease liabilities
7 Profit before Taxation
Profit before taxation is stated after charging:
Depreciation and amounts written off property, plant, and equipment:
Depreciation based on historic cost
Depreciation based on revalued assets
Depreciation of property, plant and equipment (note 12a)
Depreciation of right of use assets
Loss on disposal of fixed assets
92
Group
2022
£’000
42
Group
2022
£’000
707
166
216
239
1,328
Group
2022
£’000
2,316
1,094
3,410
1,314
3
4,727
Group
2021
£’000
1
Group
2021
£’000
469
120
158
270
1,017
Group
2021
£’000
2,178
710
2,888
1,261
–
4,149
Lok’nStore Group plc Annual Report and Accounts 2022Notes to the Financial Statements continuedFor the year ended 31 July 2022 Amounts payable to RSM UK Audit LLP and their associates for audit and non-audit services:
Audit services
– UK statutory audit of the Company and consolidated accounts
Other services
– interim agreed upon procedures
Comprising:
Audit services
Non-audit services
8 Employees
The average monthly number of persons (including Directors) employed by the Group
during the year was:
Store management
Administration
Costs for the above persons:
Wages and salaries
Social security costs
Pension costs
Share-based remuneration (options)
Group
2022
£’000
Group
2021
£’000
125
9
134
125
9
134
80
9
89
80
9
89
Group
2022
No.
Group
2021
No.
151
27
178
Group
2022
£’000
4,174
819
135
5,128
201
5,329
145
26
171
Group
2021
£’000
4,369
555
130
5,054
118
5,172
Share-based remuneration is separately disclosed in the statement of comprehensive income. Wages and salaries of
£154,920 (2021: £107,304) have been capitalised as additions to property, plant and equipment as they are directly
attributable to the acquisition of these assets.
All other employee costs are included in staff costs in the statement of comprehensive income.
In relation to pension contributions, there was £32,807 (2021: £14,292) outstanding at the year-end. There were no
employees employed by Lok’nStore Group plc in the year other than the Directors (2021: nil).
93
Strategic ReportOverviewEnvironmental and SocialGovernanceFinancial Statements 8 Employees continued
Directors’
Remuneration
2022
Executive:
A Jacobs
RA Davies
N Newman-Shepherd
Non-Executive:
J Woyda
SG Thomas
RJ Holmes
ETD Luker
CP Peal
Directors’
Remuneration
2021
Executive:
A Jacobs
RA Davies
Emoluments
£
Bonuses
£
Benefits
£
Sub Total
£
Pension
£
Gains
on Share
Options
£
Total
£
223,842
174,087
97,521
27,364
23,881
23,881
9,950
23,881
146,500
49,287
100,523
–
–
–
–
–
7,387
5,587
2,793
–
5,570
–
–
–
377,729
228,961
200,837
27,364
29,451
23,881
9,950
23,881
–
1,360,277
1,738,006
6,963
3,901
456,995
11,058
692,919
215,796
–
–
–
–
–
–
–
–
–
–
27,364
29,451
23,881
9,950
23,881
604,407
296,310
21,337
922,054
10,864
1,828,330
2,761,248
Emoluments
£
Bonuses
Benefits
Sub Total
£
£
£
Pension
£
215,233
165,797
132,500
45,946
N Newman-Shepherd
91,210
179,545
Non-Executive:
SG Thomas
RJ Holmes
ETD Luker
CP Peal
J Woyda
22,743
22,743
28,430
22,743
20,848
–
–
–
–
–
6,568
5,434
2,571
5,087
–
–
–
–
354,301
217,177
273,326
27,830
22,743
28,430
22,743
20,848
–
6,631
3,648
–
–
–
–
–
Gains
on Share
Options
£
–
–
–
14,436
–
–
–
–
Total
£
354,301
223,808
276,974
42,266
22,743
28,430
22,743
20,848
589,747
357,991
19,660
967,398
10,279
14,436
992,113
Details of the Directors’ remuneration are shown above.
The highest paid Director did not accrue any pension rights during the year. The benefits in kind all relate to medical
insurance premiums paid on behalf of the Directors. The number of Directors to whom retirement benefits are
accruing under money purchase pension schemes in respect of qualifying service is two (2021: two).
94
Lok’nStore Group plc Annual Report and Accounts 2022Notes to the Financial Statements continuedFor the year ended 31 July 2022 9 Taxation
Current tax:
UK corporation tax – current year
UK corporation tax – adjustment in respect of prior period
Total UK corporation tax
Deferred tax:
Origination and reversal of temporary differences
Impact of change of rate on closing balance
Total deferred tax
Total income tax expense for the year
The charge for the year can be reconciled to the profit for the year as follows:
Profit before tax
Tax on ordinary activities at the effective standard rate of corporation tax in the UK of 19%
(2021: 19%)
Depreciation of non-qualifying assets
Share-based payment charges in excess of corresponding tax deduction
Impact of change in tax rate on closing deferred tax balances
Adjustments in respect of prior periods – corporation tax
Tax effect of rolled over gains on sale of property
Other
Income tax expense for the year
Effective tax rate
Group
2022
£’000
1,572
111
1,683
2,113
–
2,113
3,796
2022
£’000
15,874
3,016
377
(337)
–
111
432
197
3,796
24%
Group
2021
£’000
798
–
798
260
2,107
2,367
3,165
2021
£’000
6,448
1,225
263
(20)
2,107
(375)
–
(35)
3,165
49%
In addition to the amount charged to profit or loss for the year, deferred tax relating to the revaluation of the Group’s
properties of £14.3 million (2021: £18.2 million) has been recognised as a debit/credit directly in other comprehensive
income (see note 20 on deferred tax).
The current rates of corporation tax are calculated at a rate of 19%. The deferred tax balances are measured at the
substantively enacted rates of corporation tax being 19% until 31 March 2023 and a rate of 25% thereafter.
95
Strategic ReportOverviewEnvironmental and SocialGovernanceFinancial Statements 10 Dividends
Amounts recognised as distributions to equity holders in the year:
Final dividend for the year ended 31 July 2021 (10.67 pence per share)
Interim dividend for the year to 31 July 2022 (5.00 pence per share)
Final dividend for the year ended 31 July 2020 (9.00 pence per share)
Interim dividend for the year to 31 July 2021 (4.33 pence per share)
2022
£’000
3,132
1,469
–
–
4,601
2021
£’000
–
–
2,612
1,253
3,865
In respect of the current year the Directors paid an interim dividend of 5.00 pence per share to shareholders on
10 June 2022. The Directors propose that a final dividend of 12.25 pence per share will be paid to the shareholders.
The total estimated final dividend to be paid is approximately £3.6 million based on the number of shares in issue at
14 October 2022 as adjusted for shares held in the Employee Benefits Trust.
This is subject to approval by shareholders at the Annual General Meeting on 8 December 2022 and has not been
included as a liability in these financial statements. The ex-dividend date will be 24 November 2022; the record date
25 November 2022; with an intended payment date of 6 January 2023. The final deadline for Dividend Reinvestment
Election (DRIP) is 9 December 2022.
11 Earnings per Share
The calculations of earnings per share are based on the following profits and numbers of shares.
Total profit for the financial year attributable to owners of the parent
Weighted average number of shares
For basic earnings per share
Dilutive effect of share options1
For diluted earnings per share
Group
2022
£’000
12,078
Group
2021
£’000
3,283
2022
2021
No. of Shares
No. of Shares
29,287,451
29,035,104
549,321
527,846
29,836,772
29,562,950
1
Further options that could potentially dilute EPS in the future are excluded from the above because they are not dilutive in the period presented.
Full details of share options are included in notes 22 to 25.
Earnings per share
Basic
Total basic earnings per share
Diluted
Total diluted earnings per share
Group
2022
Pence
41.24p
Group
2021
Pence
11.33p
40.48p
11.10p
96
Lok’nStore Group plc Annual Report and Accounts 2022Notes to the Financial Statements continuedFor the year ended 31 July 2022 12a) Property, Plant and Equipment
Group
Cost or valuation
1 August 2020
Additions
Transfers
Disposals
Revaluations
31 July 2021
Depreciation
1 August 2020
Depreciation
Disposals
Revaluations
31 July 2021
Cost or valuation
1 August 2021
Additions
Transfers
Disposals
Revaluations
31 July 2022
Depreciation
1 August 2021
Depreciation
Disposals
Revaluations
31 July 2022
Development
Property
Assets at
Cost
£’000
Land and
Buildings
at Valuation
£’000
Short
Leasehold
Improvements
at Cost
£’000
Fixtures,
Fittings and
Equipment
at Cost
£’000
Motor
Vehicles at
Cost
£’000
Total
£’000
29,885
21,688
(16,654)
(1,243)
–
141,366
325
13,157
(1,497)
46,266
3,997
3,560
–
–
–
26,943
10
202,201
1,281
3,497
(1,301)
–
–
–
–
–
26,854
–
(4,041)
46,266
33,676
199,617
7,557
30,420
10
271,280
–
–
–
–
–
–
1,453
–
(1,453)
–
33,676
10,611
(15,072)
–
–
199,617
756
11,234
(30,101)
58,299
–
–
–
–
–
–
1,872
–
(1,872)
–
2,269
240
–
–
2,509
5,048
7,557
158
–
–
–
12,664
1,195
(750)
–
13,109
17,311
30,420
663
3,838
(3,615)
–
2,509
296
–
–
2,805
4,910
13,109
1,242
(1,963)
–
12,388
18,918
10
–
–
–
10
–
10
–
–
–
–
10
10
–
–
–
10
–
14,943
2,888
(750)
(1,453)
15,628
255,652
271,280
12,188*
–
(33,716)
58,299
308,051
15,628
3,410
(1,963)
(1,872)
15,203
292,848
29,215
239,805
7,715
31,306
Net book value at 31 July 2021
33,676
199,617
Net book value at 31 July 2022
29,215
239,805
*
Including capitalised interest costs of £589,843 (2021: £380,193).
The Group has an active store development programme and in accordance with IAS 23 (Borrowing costs) has
material assets that take a substantial period of time to develop from acquisition to ultimate store opening. Accordingly
borrowing costs of £589,843 (2021: £380,193) have been capitalised that are directly attributable to the acquisition,
construction and fit-out of these qualifying store assets. £149,321 of this amount relates to development stores which
opened during the year leaving a balance of £440,522 carried in development property assets. If all property, plant
and equipment were stated at historic cost the carrying value would be £111.4 million (2021: £113.0 million).
97
Strategic ReportOverviewEnvironmental and SocialGovernanceFinancial Statements 12a) Property, Plant and Equipment continued
Capital expenditure during the year totalled £12.2 million (2021: £26.9 million). This was primarily the purchase of
the Peterborough site, together with ongoing planning, construction and fit out works at other sites, principally at
our Warrington and Stevenage stores and the completion of construction works at our Leicester and Salford stores.
Disposals during the period relate to the sale and manage-back of four trading stores. Costs relating to the planning
and pre-development works on our Bournemouth, Cheshunt, Peterborough and Staines sites also featured.
Property, plant and equipment (non-current assets) with a carrying value of £292.8 million (2021: £255.7 million) are
pledged as security for bank loans.
Independent External Market Valuation of Freehold and Leasehold Land and Buildings
Fair Value Measurement
The fair value hierarchy within which the fair value measurements are categorised is level 3, in accordance with
IFRS 13 (Fair value measurement).
On 31 July 2022, an independent professional valuation was prepared by Jones Lang LaSalle Limited (JLL) in respect
of 15 freehold, and nine leasehold stores operated by Lok’nStore. The valuation was prepared in accordance with the
RICS Valuation – Global Standards 2021 – UK national supplement, published by The Royal Institution of Chartered
Surveyors (the RICS Red Book) and the valuation methodology is explained in more detail below. The valuations
were prepared on the basis of Fair Value as a fully equipped operational entity having regard to trading potential.
The valuation was provided for accounts purposes and as such, is a Regulated Purpose Valuation as defined in
the Red Book. In compliance with the disclosure requirements of the RICS Red Book JLL have confirmed that:
• This is the seventh year that JLL has been appointed to value the properties.
• The valuers who prepared the valuation have the necessary skills and experience having been significantly
involved in the sector.
• JLL do not provide other significant professional or agency services to the Company.
•
In relation to the preceding financial year of JLL the proportion of the total fees payable by the Company to the
total fee income of the firm is less than 5% and is minimal.
The valuation report indicates a total valuation for all properties valued of £279.0 million (2021: £234.9 million) of
which £254.8 million (2021: £212.8 million) relates to freehold properties, and £24.2 million (2021: £22.1 million)
relates to properties held under leases.
Freehold land and buildings are carried at valuation in the statement of financial position. Short leasehold
improvements at properties held under leases are carried at cost rather than valuation in accordance with IFRS.
For the trading properties the valuation methodology explained in more detail below is based on fair value as fully
equipped operational entities, having regard to trading potential. Of the £254.8 million (2021: £212.8 million) valuation
of the freehold properties £16.6 million (2021: £14.7 million) relates to the net book value of fixtures, fittings and
equipment, and the remaining £238.2 million (2021: £198.1 million) relates to freehold properties.
The 2022 valuation includes and reflects movements in value which have resulted from the operational performance
of the stores and market movements in the investment environment.
98
Lok’nStore Group plc Annual Report and Accounts 2022Notes to the Financial Statements continuedFor the year ended 31 July 2022 Valuation Methodology
Jones Lang LaSalle Limited (JLL) have adopted the profits method of valuation and cross-checked with the direct
comparison method based on recent transactions in the sector, which is the main method of pricing adopted
by purchasers of self-storage properties. The carrying value of freehold land and buildings of £239.8 million also
includes £1.5 million of assets held at directors’ valuation (see below).
JLL have valued the assets on an individual basis and have disregarded any portfolio effect.
The profits method of valuation considers the cash flow generated by the trading potential of the self-storage facility.
Due to the specialised design and use of the buildings, the value is typically based on their ability to generate a net
income from operating as self-storage facilities.
JLL have constructed a discounted cash flow model. This sets out their explicit assumptions on the underlying cash
flow that they believe could be generated by a Reasonably Efficient Operator at each of the properties, both at the
valuation date and in the near future as the properties increase their occupancy and rates charged to customers.
Judgements are made as to the trading potential and likely long-term sustainable occupancy.
Stable occupancy depends upon the nature of demand, size of property and nearby competition, and allows for a
reasonable vacancy rate to enable the operator to contract units to new customers. In the valuation the assumed
stabilised occupancy level for the 24 trading stores (both freeholds and leaseholds) averages 88.23% (2021: 88.5%).
Expenditure is deducted (such as business rates, staff costs, repair and maintenance, utilities, marketing and bad
debts) as well as an operator’s charge which takes account of central costs. JLL also make an allowance for long-
term capex requirements where applicable. The assumptions used by JLL include:
• The cash flow for freeholds runs for an explicit period of ten years, after which it is capitalised at an all risks yield
which reflects the implicit future growth of the business, or a hypothetical sale.
• The cash flow for leaseholds continues for the unexpired term of the lease.
• The Discount Rate applied has had regard to recent transactions, weighted average costs of capital and target
return in other asset types with adjustments made to reflect differences in the risk and liquidity profile.
• The weighted average annual Discount Rate adopted (for both freeholds and leaseholds) is 7.21% (2021: 9.24%).
• The Discount Rates used in the freehold valuation ranges from 6.50% to 8.75% (2021: 7.5% to 9.25%).
• The yield arising from the first year of the projected cash flow is 5.30% (2021: 6.49%), rising to 6.79% (2021: 7.61%)
in year five.
• JLL have assumed purchasers’ costs of 6.80% (2021: 6.80%).
• The average assumed stabilised occupancy is 88.23% (2021: 88.85%).
• The average Exit Yield assumed is 6.16% (2021: 6.73%).
The comparison method considers recent transactions where self-storage properties have sold, and then adjusts
them based on a multiple of current earnings, and a capital value per square foot. They are adjusted to reflect
differences in location, physical characteristics, local supply and demand, tenure and trading levels.
The Group has reported that the Lok’nStore trading stores have performed very well in terms of increasing pricing
while maintaining occupancy over the course of the year.
For leaseholds, the same methodology has been used as for freehold property, except that no sale of the assets
in the tenth year is assumed, but the discounted cash flow is extended to the expiry of the lease. The average
unexpired term of the Group’s operating leaseholds is approximately ten years and one month as at 31 July 2022
(11 years and one month: 31 July 2021). Valuations for stores held under leases are not reflected in the statement
of financial position and the assets in relation to these stores are carried at cost less accumulated depreciation.
99
Strategic ReportOverviewEnvironmental and SocialGovernanceFinancial Statements 12a) Property, Plant and Equipment continued
Valuation Methodology continued
In 2011, one of the Group store’s leases was renegotiated and includes a ten-year option to renew the leases from
March 2026 to March 2036. The option to extend is only operable in the event that all four of the leases applicable
to this store are extended and this option is personal to Lok’nStore or another ‘major self-storage operator’, to be
approved by the landlord (approval not to be unreasonably withheld). The JLL valuation on this store is based on
this Special Assumption that the option to extend the lease for ten years is exercised. This is consistent with the
approach taken in previous years.
Self-storage valuations are complex and involve a degree of judgement. As a guide and assuming all other factors
or constant, improvements in a store’s EBITDA would lead to an increase in that store’s valuation. Conversely, an
increase in Exit Yield and Discount Rate would result in a lower valuation and vice-versa. The effect of a change
in more than one input would magnify the impact on the valuation. Inputs moving in opposite directions, such as
price and occupancy improving but capitalisation rates increasing could result in no net impact on valuations.
As an example of the sensitivity of capitalisation rates;
• A 50bpts decrease in the Exit Yields and Discount Rate would result in a £27.75 million increase in this
year’s valuation.
• A 100bpts decrease in the Exit Yields and Discount Rate would result in a £62.0 million increase in this
year’s valuation.
• A 50bpts increase in the Exit Yield and Discount Rate would result in a £23.1 million decrease in this
year’s valuation.
• A 100bpts increase in the Exit Yield and Discount Rate would result in a £42.5 million decrease in this
year’s valuation.
It is the Company’s policy to conduct independent valuations of all trading assets at the end of each financial year.
At the interim half year stage, the directors will consult with JLL to consider whether there has been any material
change in market conditions. If there has been then the Directors will instruct an Independent Valuation at this point.
Directors’ Valuation of Land and Property
Land & Buildings at the rear of the new Salford trading store
Following the opening of the new Salford store in 2021, there is available land and building at the rear of the new
store which is suitable for rent on commercial terms to third party users. Based on negotiated rents with tenants,
the Directors continue to place a Directors’ Valuation of £1.5 million (2021: £1.5 million) on this land and building.
The total value of land and property carried at Directors’ Valuation at 31 July 2022 is £1.5 million (2021: £1.5 million).
100
Lok’nStore Group plc Annual Report and Accounts 2022Notes to the Financial Statements continuedFor the year ended 31 July 2022 12b) Right of use assets (ROU)
The Group accounts for the value of its property leases on the balance sheet by the recognition of a right of use asset
(the right to use the leased item) and a corresponding financial liability to pay rentals due over the property lease
term. This treatment relates to the Group’s property leases. The Group has no leases on any other types of assets.
The Group recognises right of use assets (ROU) of £10.4 million at 31 July 2022 (2021: £10.5 million) and total lease
liabilities of £10.9 million, (2021: £11.2 million) with depreciation charges of £1.31 million (2021: £1.26 million) and lease
interest charges of £0.2 million (2021: £0.3 million).
Detailed analysis is provided in the tables below:
Total annual rents payable under property leases
Right of use asset (ROU)
Current Lease Liability
Amounts due within one year
Non-current Lease Liability
Amounts due in one to two years
Amounts due in three to five years
Amounts due in more than five years
Non-current Lease Liability
Total lease liability
Property rentals
Depreciation of right of use asset (ROU)
Interest charged on lease liability
Impact on Comprehensive Income
Group
31 July 2022
£’000
1,746
Group
31 July 2021
£’000
1,559
Group
31 July 2022
£’000
10,424
Group
31 July 2021
£’000
10,503
1,612
1,258
1,174
2,774
5,334
9,282
10,894
1,085
2,585
6,238
9,908
11,166
Group
31 July 2022
£’000
1,746
(1,314)
(239)
193
Group
31 July 2021
£’000
1,559
(1,261)
(270)
28
The Group has no leases on any other types of assets. The Present Value of all future operating lease payments is
calculated using 2.2% (2021: 2.2%) as an incremental borrowing rate as the single Discount Rate. The right of use
assets are depreciated based on the individual lease term of the separate leases.
101
Strategic ReportOverviewEnvironmental and SocialGovernanceFinancial Statements 13 Investments
Company investments in subsidiary undertakings
31 July 2020
Capital contributions arising from share-based payments
31 July 2021
Capital contributions arising from share-based payments
31 July 2022
£’000
2,552
118
2,670
201
2,871
The Company holds more than 20% of the share capital of the following companies, all of which are incorporated in
England and Wales:
Company Name
Lok’nStore Limited* #
Lok’nStore Trustee Limited ¥ †
Southern Engineering and Machinery
Company Ltd ¥* #
Semco Machine Tools Limited ≠ #
Semco Engineering Limited ≠ #
ParknCruise Limited ¥ †
The Box Room (Self-storage) Limited ¥* †
Company
Registration
No.
02902717
03788705
00381670
01025573
01164294
10329934
06840417
% of Shares and Voting Rights
Class of
Shareholding
Directly
Indirectly
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100
–
–
–
–
–
–
–
100
100
100
100
100
100
Nature
of Entity
Self-storage
Trustee
Self-storage
Dormant
Dormant
Dormant
Self-storage
¥
≠
*
†
#
These companies are subsidiaries of Lok’nStore Limited.
These companies are subsidiaries of Southern Engineering and Machinery Company Limited and did not trade during the year.
These companies have taken the exemption from audit under Section 479A of the Companies Act 2006.
The address of these companies is 112, Hawley Lane, Farnborough, Hants. GU14 8JE.
The address of these companies is 1, Fleet Place, London. EC4M 7WS.
14 Inventories
Consumables and goods for resale
Group
2022
£’000
143
Group
2021
£’000
290
The amount of inventories recognised in Group cost of sales as an expense during the year was £112,887 (2021:
£124,656) (See note 3). The Company had no inventory in either year.
15 Trade and Other Receivables
Trade receivables
Other receivables
Taxation
Prepayments and accrued income
Group
2022
£’000
1,198
2,318
–
472
3,988
Group
2021
£’000
1,451
881
1,497
444
4,273
The Directors consider that the carrying amount of trade and other receivables approximates to their fair value.
102
Lok’nStore Group plc Annual Report and Accounts 2022Notes to the Financial Statements continuedFor the year ended 31 July 2022 Other receivables include monies receivable from the managed stores for services provided by the Group. The 2021
taxation debtor of £1.497 million was a VAT repayment owed to the Group by HMRC which was received post year-end.
The following balances existed between the Company and its subsidiaries at 31 July:
Net amount due from Lok’nStore Limited
Company
2022
£’000
28,785
Company
2021
£’000
27,051
The amount due from Lok’nStore Limited is interest free. The balance is repayable on demand.
Trade Receivables
In respect of its self-storage business the Group does not typically offer credit terms to its customers and hence the
Group is not exposed to significant credit risk. All customers are required to pay in advance of the storage period.
Late charges are applied to a customer’s account if they are more than ten days overdue in their payment. The
Group provides for receivables based upon sales levels and estimated recoverability. There is a right of lien over
the customers’ goods, so if they have not paid within a certain time frame the Group has the right to sell the items
they store to cover the debt owed by the customer. Trade receivables that are overdue are provided for based on
estimated irrecoverable amounts, determined by reference to expected credit losses.
For individual self-storage customers, the Group does not perform credit checks. However, this is mitigated by the
fact that all customers are required to pay in advance. Before accepting a new business customer who wishes to
use a number of the Group’s stores, the Group uses an external credit rating to assess the potential customer’s
credit quality and defines credit limits by customer. There are no customers who represent more than 5% of the total
balance of trade receivables.
Included in the Group’s trade receivables balance are receivables with a carrying amount of £100,214 (2021: £89,329)
which are past due at the reporting date for which the Group has not provided as there has not been a significant
change in credit quality and the amounts are still considered recoverable. The Group holds a right of lien over its
self-storage customers’ goods if these debts are not paid. The average age of these receivables is 53 days past due
(2021: 55 days past due). The Group does not expect credit losses on intra-group balances.
Ageing of Past Due but Not Impaired Receivables
0–30 days
30–60 days
60+ days
Total
Movement in the allowance for credit losses
Balance at the beginning of the year
Impairment losses recognised
Amounts written off as uncollectible
Balance at the end of the year
Group
2022
£’000
22
8
70
100
Group
2022
£’000
147
30
(77)
100
Group
2021
£’000
14
4
71
89
Group
2021
£’000
189
22
(64)
147
The concentration of credit risk is limited due to the customer base being large and unrelated. Accordingly, the
Directors believe that there is no further provision required.
103
Strategic ReportOverviewEnvironmental and SocialGovernanceFinancial Statements
15 Trade and Other Receivables continued
Ageing of Impaired Trade Receivables
0–30 days
30–60 days
60+ days
Total
16 Trade and Other Payables
Trade payables
Taxation and social security costs
Other payables
Accruals and deferred income
Group
2022
£’000
–
–
100
100
Group
2022
£’000
1,849
1,014
588
3,778
7,229
Group
2021
£’000
–
–
147
147
Group
2021
£’000
1,385
370
690
3,397
5,842
The Directors consider that the carrying amount of trade and other payables approximates fair value. The Company
had no trade and other payables in either year.
17 Financial Instruments
Capital Management and Gearing
The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while
maximising the return to shareholders through the optimisation of the debt and equity balance.
The capital structure of the Group consists of debt, which include the borrowings disclosed in note 18, cash and
cash equivalents and equity attributable to the owners of the Parent, comprising issued capital, reserves and
retained earnings as disclosed in the Consolidated Statement of Changes in Equity. The Group’s banking facilities
require that management give regular consideration to interest rate hedging strategy. The Group has complied with
this during the year with hedging forming a Board agenda item for discussion at each Board meeting.
The Group’s Board reviews the capital structure on an on-going basis. As part of this review, the Board considers
the cost of capital and the risks associated with each class of capital.
The Group seeks to have a relatively conservative gearing ratio (the proportion of net debt to equity) balancing
the overall level with the opportunities for the growth of the business. The Board considers at each review the
appropriateness of the current ratio in light of the above. The Board is currently satisfied with the Group’s gearing ratio.
104
Lok’nStore Group plc Annual Report and Accounts 2022Notes to the Financial Statements continuedFor the year ended 31 July 2022 The gearing ratio at the year-end is as follows:
Gearing – Bank borrowings
Gross debt – bank borrowings*
Cash and cash equivalents
Net debt
Total equity – balance sheet
Net debt to equity ratio
* Gross debt is the total amount of bank debt drawn before any amortisation of bank arrangement fees.
Total Gearing – Bank borrowings and lease liabilities
Gross debt – bank borrowings*
Gross debt – lease liabilities
Cash and cash equivalents
Net debt
Total equity – balance sheet
Net debt to equity ratio
Group
2022
£’000
(66,785)
46,465
(20,320)
205,346
9.9%
Group
2022
£’000
(66,785)
(10,894)
46,465
(31,214)
205,346
15.2%
Group
2021
£’000
(65,399)
9,105
(56,294)
151,259
37.2%
Group
2021
£’000
(65,399)
(11,166)
9,105
(67,460)
151,259
44.6%
* Gross debt is the total amount of bank debt drawn before any amortisation of bank arrangement fees.
The movement of the Group’s gearing ratio arises principally through the combined effect of an increase in the value
of its trading properties, and the cash generated from operations, offset primarily by drawdown of debt to fund the
acquisition of the development site in Peterborough. The Group’s gearing ratio was also enhanced by the profitable
disposals during the year relating to the sale and manage-back of four trading stores.
The Group’s operating cash was also applied to ongoing planning, construction and fit out works at other sites,
principally at our Warrington and Stevenage stores and the completion of construction works at our Leicester
and Salford stores. Costs relating to the planning and pre-development works on our Bournemouth, Cheshunt,
Peterborough and Staines sites also featured.
Exposure to credit and interest rate risk arises in the normal course of the Group’s business.
A Derivative financial instruments and hedge accounting
The Group’s activities expose it primarily to the financial risks of interest rates. The Group previously has hedged
through the deployment of interest rate swaps although the Group had no such instruments in place at 31 July 2021
or 31 July 2022. The Board continues to keep its hedging policy under periodic review.
B Debt management
Debt is defined as non-current and current borrowings, as detailed in note 18. Equity includes all capital and reserves
of the Group. The Group is not subject to externally imposed capital requirements.
The Group borrows through a joint revolving credit facility with Royal Bank of Scotland/NatWest Bank plc and ABN
AMRO Bank secured on its store portfolio and other Group assets, excluding intangibles, with a net book value of
£292.8 million (2021: £255.7 million).
Borrowings are arranged to ensure the Group fulfils its strategy of growth and development of its stores and to
maintain short-term liquidity. As at the reporting date the Group has a committed revolving credit facility of £100 million
(2021: £75 million) providing undrawn committed facilities at 31 July 2022 of £33.2 million. This facility runs to April
2026, and details are provided in note 18 (Borrowings).
105
Strategic ReportOverviewEnvironmental and SocialGovernanceFinancial Statements 17 Financial Instruments continued
Capital Management and Gearing continued
C Interest rate risk management
The Group’s policy on interest rate management is agreed at Board level and is reviewed on an on-going basis. All
borrowings are denominated in Sterling and are detailed in note 17. The Group has a number of revolving loans within
its overall revolving credit facility and as such is exposed to interest rate risks at the time of renewal arising from any
upward movement in the SONIA rate. With the rising level of interest rates, the Board monitors closely its effect on
the business and has levers in place to mitigate the effects.
Cash balances held in current accounts attract no interest, but surplus cash is transferred daily to a treasury
deposit account which earns interest at the prevailing money market rates. All amounts are denominated in Sterling.
The balances at 31 July 2022 are as follows:
Variable rate treasury deposits#
SIP trustee deposits
Cash in operating current accounts
Other cash and cash equivalents
Total cash and cash equivalents
Group
2022
£’000
45,371
63
1,031
–
46,465
Group
2021
£’000
7,604
63
1,430
8
9,105
#
On 7 July 2022, the Group placed £15.0 million on Treasury Deposit Reserve on a 3-month fixed rate at 1.36% which ended on 7 October 2022.
On its maturity date this amount was rolled over into a 4-month fixed rate on Treasury Deposit Reserve at 2%.
Also, on 7 July 2022, the Group placed £15.0 million on Treasury Deposit Reserve on a 4-month fixed rate at 1.55%
which ends on 7 November 2022.
The Group reviews the current and forecast projections of cash flow, borrowing and interest cover as part of its
monthly management accounts review. In addition, an analysis of the impact of significant transactions is carried out
regularly, as well as a sensitivity analysis of the impact of movements in interest rates on gearing and interest cover.
D Interest rate sensitivity analysis
Over the longer term, significant changes in interest rates may have an impact on consolidated earnings.
At 31 July 2022, it is estimated that an increase of one percentage point in interest rates would have reduced the
Group’s annual profit before tax by £667,846 (2021: £653,989) and conversely a decrease of one percentage point
in interest rates would have increased the Group’s annual profit before tax by £667,846 (2021: £653,989). There
would have been no effect on amounts recognised directly in other comprehensive income. The sensitivity has
been calculated by increasing by 1% the average variable interest rate of 1.71% and applying to the variable rate
borrowings of £68.8 million in the year (2021: £65.4 million/1.54%).
E Cash management and liquidity
Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has built an appropriate
liquidity risk management framework for the management of the Group’s short, medium and long-term funding and
liquidity management requirements. The Group manages liquidity risk by maintaining adequate reserves, banking
facilities and reserve borrowing facilities by continuously monitoring forecast and actual cash flows and matching
the maturity profiles of financial assets and liabilities. Included in note B above is a description of additional undrawn
facilities that the Group has at its disposal to further reduce liquidity risk.
Short-term money market deposits are used to manage liquidity whilst maximising the rate of return on cash resources,
giving due consideration to risk.
106
Lok’nStore Group plc Annual Report and Accounts 2022Notes to the Financial Statements continuedFor the year ended 31 July 2022 F Foreign currency management
The Group operates solely in the United Kingdom and as such all of the Group’s financial assets and liabilities are
denominated in Sterling and there is no exposure to exchange risk.
G Credit risk
The credit risk management policies of the Group with respect to trade receivables are discussed in note 15.
There has not been a significant change in credit quality.
The Group has a strong credit model with customers paying four-weekly in advance for their storage. The Group has
no significant concentration of credit risk, with exposure spread across 17,000 customers (2021: 16,000) and with no
individual self-storage customer accounting for more than 1% of total revenue and no entities under common control
(e.g., Government) accounting for more than 5% of total revenues.
The Group holds a right of lien over its self-storage customers’ goods if customer debts are not paid although this is
used relatively infrequently within the context of overall customer numbers and only ever as a final stage in the debt
recovery process.
The credit risk on liquid funds is limited because the counterparty is a bank with high credit ratings assigned by
international credit-rating agencies, in line with the Group’s policy which is to borrow from major institutional banks
when arranging finance.
The Group’s maximum exposure to credit risk at 31 July 2022 was £2.26 million (2021: £1.48 million) on receivables
and £46.5 million (2021: £9.1 million) on cash and cash equivalents.
H Maturity analysis of financial liabilities
The undiscounted contractual cash flow maturities are as follows:
2022 – Group
Over five years
From two to five years
From one to two years
Due after more than one year
Due within one year
Total contractual undiscounted cash flows
2021 – Group
Over five years
From two to five years
From one to two years
Due after more than one year
Due within one year
Total contractual undiscounted cash flows
Lease liabilities are separately disclosed in note 19.
Trade and
Other Payables
£’000
Borrowings
£’000
Interest on
Borrowings
£’000
–
–
–
–
4,207
4,207
–
66,785
–
66,785
–
66,785
–
3,131
1,809
4,940
1,809
6,749
Trade and
Other Payables
£’000
Borrowings
£’000
Interest on
Borrowings
£’000
–
–
–
–
2,856
2,856
–
65,399
–
65,399
–
65,399
–
2,248
1,010
3,258
1,010
4,268
107
Strategic ReportOverviewEnvironmental and SocialGovernanceFinancial Statements 17 Financial Instruments continued
Capital Management and Gearing continued
I Fair values of financial instruments
Categories of financial assets and financial liabilities
Financial assets measured at amortised cost
Trade and other receivables1
Cash and cash equivalents
Financial liabilities measured at amortised cost
Trade and other payables
Lease liabilities
Bank loans
Group
2022
£’000
3,516
46,465
(4,207)
(10,894)
(66,196)
Group
2021
£’000
2,824
9,105
(2,856)
(11,166)
(64,941)
1
Includes £1.0 million (gross) relating to fees receivable from the Aldershot managed Store classified in Other Debtors, plus Trade Receivables of
£1.2 million plus Other Receivables of £1.3 million.
The fair values of the Group’s cash and short-term deposits and those of other financial assets equate to their
carrying amounts. The amounts are presented net of provisions for doubtful receivables and allowances for
impairment are made where appropriate.
J Company’s financial instruments
The Company’s financial assets are amounts owed by subsidiary undertakings amounting to £28.8 million
(2021: £27.1 million) which are classified as loans and receivables, and the investment in its subsidiary
undertaking of £2.87 million (2021: £2.67 million). These amounts are denominated in Sterling. The Company
has no financial liabilities.
18 Borrowings
Bank borrowings
Non-current
Bank loans repayable in more than two years but not more than five years
Gross
Deferred financing costs
Net bank borrowings
Non-current borrowings
Group
2022
£’000
66,785
(589)
66,196
66,196
Group
2021
£’000
65,399
(458)
64,941
64,941
• £25 million accordion executed and increases bank facility from £75 million to £100 million
• Bank facility extended by one year to April 2026
• Migration from LIBOR to an alternative risk-free reference rate (SONIA)
On 20 October 2021, the Group executed the accordion arrangement embedded within the Revolving Credit Facility
which increases the facilities available to the Group from £75 million to £100 million.
In addition, the Group has also agreed a one-year extension on its existing joint banking facility with National
Westminster Bank/ Royal Bank of Scotland plc and ABN AMRO Bank N V. The facility, which was due to expire
in April 2025, will now run until April 2026 providing funding for more Landmark site acquisitions.
108
Lok’nStore Group plc Annual Report and Accounts 2022Notes to the Financial Statements continuedFor the year ended 31 July 2022 The two principal bank covenants (LTV and Senior interest) and margin are unaffected by the execution of the
accordion and this extension of term. Margin/pricing is also unaffected.
Amendments to the Facility Agreement dealing with the transition from LIBOR to SONIA (Sterling Over Night
Indexed Average) have also been made, fulfilling UK regulators’ requirements ahead of LIBOR’s phasing out after
31 December 2021.
The Group currently has £66.8 million drawn against its facility, which is secured with National Westminster Bank/
RBS and ABN AMRO jointly by legal charges and debentures over the freehold and leasehold properties and
other tangible assets of the business with a net book value of £292.8 million (2021: £255.7 million) together with
cross-company guarantees from Group companies.
With current facility utilisation at £66.8 million and combined with cash balances of £46.5 million the £100 million
facility provides around £79.7 million of available cash headroom.
19 Lease Liabilities
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement
date, discounted by using the rate implicit in the leases. Where this cannot be readily determined the Present Value
of all future operating lease payments is calculated using 2.2% (2021: 2.2%) as an incremental borrowing rate as the
Discount Rate.
After the application of a weighted depreciation charge based on the individual lease term of the separate leases
and the imputation of an interest charge at 2.2% (2021: 2.2%) as part of the amortisation of the lease liability the total
lease liabilities are shown below.
Lease liabilities attributable to right of use assets
Current lease liabilities
Amounts due within one year
Non-current lease liabilities
Amounts due in one to two years
Amounts due in three to five years
Amounts due in more than five years
Non-current lease liabilities
Total lease liabilities
Lease liabilities attributable to right of use assets
Balance brought forward
Increase in property rentals
Lease repayments
Lease interest (non-cash)
Total lease liabilities
Group
2022
£’000
Group
2021
£’000
1,612
1,258
1,174
2,774
5,334
9,282
10,894
Group
2022
£’000
11,166
1,235
(1,746)
239
10,894
1,085
2,585
6,238
9,908
11,166
Group
2021
£’000
12,455
–
(1,559)
270
11,166
The portfolio of property leases all have similar characteristics. Subject to periodic future rent reviews, typically
every five years, there are no variable lease payments. The Group has no leases on any other types of assets.
The total future commitments due under non-cancellable leases is set out in note 30 (Commitments under
Property Leases).
109
Strategic ReportOverviewEnvironmental and SocialGovernanceFinancial Statements 20 Deferred Tax
Deferred tax liability
Liability at start of year
Total charge to income for the year
Tax charged directly to other comprehensive income
Charge / (credit) to share-based payment reserve
Liability at end of year
Group
2022
£’000
46,760
2,113
48,873
14,284
57
63,214
Group
2021
£’000
26,760
2,367
29,127
18,224
(591)
46,760
The following are the major deferred tax liabilities and assets recognised by the Group and the movements during
the year:
Accelerated
Capital
Allowances
£’000
Other
Temporary
Differences
£’000
Revaluation
of Properties
£’000
Rolled over
Gain on
Disposal
£’000
Share
Options
£’000
Total
£’000
At 31 July 2020
Charge to income for the year
Charge to other comprehensive income
Credit to share-based payment reserve
At 31 July 2021
Charge to income for the year
Charge to other comprehensive income
Credit to share-based payment reserve
3,649
1,479
–
–
5,128
591
–
–
At 31 July 2022
5,719
609
479
130
–
–
19,939
–
18,224
–
609
38,163
–
–
–
–
9,978
–
48,141
2,956
758
–
–
3,714
1,522
4,306
–
(263)
26,760
–
–
(591)
(854)
–
–
57
2,367
18,224
(591)
46,760
2,113
14,284
57
9,542
(797)
63,214
The increase in the deferred tax liability arises substantially from a combination of an increase in the valuation of the
Group’s stores and a provision for the gain arising on the sale of the four sale and manage-back stores which will in
due course be subject to a roll-over relief claim.
The deferred tax provision is substantially a tax provision against the potential crystallisation (sales) of revalued
properties and past ’rolled over’ gains and amounts to £63.2 million (2021: £46.8 million), the crystallisation of which
is within the Board’s control.
110
Lok’nStore Group plc Annual Report and Accounts 2022Notes to the Financial Statements continuedFor the year ended 31 July 2022 21 Share Capital
Authorised:
35,000,000 ordinary shares of 1 pence each (2021: 35,000,000)
Allotted, issued and fully paid ordinary shares
Balance at start of year
Options exercised during the year
Balance at end of year
Number of shares at start of the year
Options exercised during the year
Number of shares at end of the year
2022
£’000
350
2022
£’000
298
3
301
2021
£’000
350
2021
£’000
297
1
298
Called up,
Allotted and
Fully Paid
Number
Called up,
Allotted and
Fully Paid
Number
29,686,787
29,633,290
316,758
53,497
30,003,545
29,686,787
The Company has one class of Ordinary Shares which carry no right to fixed income.
22 Equity-Settled Share-Based Payment Plans
The Group operates three equity-settled share-based payment plans: one approved and two unapproved share
option schemes.
The Company has granted the following share options:
2022
Summary
Unapproved Share Options
(refer note 24(a))
Unapproved Share Options
(PPP Scheme) – refer note 24(b))
Approved CSOP Share Options
(refer note 25)
Total
2021
Summary
Unapproved Share Options
(refer note 24(a))
Unapproved Share Options
(PPP Scheme) – refer note 24(b))
Approved CSOP Share Options
(refer note 25)
Total
As at
31 July 2021
No. of Options
Granted
Exercised
Lapsed/
Surrendered
As at
31 July 2022
No. of Options
683,950
1,163
(280,323)
990,000
277,658
–
86,476
1,760,426
12,542
291,363
(36,435)
(316,758)
–
–
–
–
404,790
1,267,658
62,583
1,735,031
As at
31 July 2020
No. of Options
Granted
Exercised
Lapsed/
Surrendered
As at
31 July 2021
No. of Options
715,104
8,608
(39,762)
–
683,950
830,000
280,000
–
(120,000)
990,000
97,935
1,643,039
2,276
290,884
(13,735)
(53,497)
–
86,476
(120,000)
1,760,426
111
Strategic ReportOverviewEnvironmental and SocialGovernanceFinancial Statements 22 Equity-Settled Share-Based Payment Plans continued
The following table shows options held by Directors under all schemes.
Total at
31 July 2021
Options
Granted
Options
Exercised
Unapproved
Scheme
Approved
CSOP Share
Options
Total at
31 July 2022
2022
Executive Directors
A Jacobs – Unapproved
A Jacobs – PPP
A Jacobs – total
RA Davies – Unapproved
RA Davies – CSOP
RA Davies – PPP
RA Davies total
206,087
160,000
366,087
246,977
7,742
160,000
414,719
N Newman-Shepherd – Unapproved
135,599
N Newman-Shepherd – CSOP
N Newman-Shepherd – PPP
N Newman-Shepherd total
8,618
240,000
384,217
–
(206,087)
40,000
40,000
–
(206,087)
–
(65,000)
38,236
38,236
–
–
59,422
59,422
(7,742)
–
(72,742)
–
(1,400)
–
(1,400)
–
200,000
200,000
181,977
–
198,236
380,213
135,599
7,218
299,422
442,239
–
–
–
–
2,941
–
2,941
–
964
–
964
–
200,000
200,000
181,977
2,941
198,236
383,154
135,599
8,182
299,422
443,203
All Directors total
1,165,023
137,658
(280,229)
1,022,452
3,905
1,026,357
Total at
31 July 2020
Options
Granted
Options
Exercised
Unapproved
Scheme
Approved
CSOP Share
Options
Total at
31 July 2021
2021
Executive Directors
A Jacobs – Unapproved
A Jacobs – PPP
A Jacobs – total
RA Davies – Unapproved
RA Davies – CSOP
RA Davies – PPP
RA Davies total
N Newman-Shepherd – Unapproved
N Newman-Shepherd – CSOP
N Newman-Shepherd – PPP
N Newman-Shepherd total
Non-Executive Directors
206,087
80,000
286,087
246,977
7,742
80,000
334,719
172,421
10,661
120,000
303,082
–
40,000
40,000
–
–
40,000
40,000
–
–
60,000
60,000
–
–
–
–
–
–
–
(36,822)
(2,043)
–
(38,865)
206,087
120,000
326,087
246,977
–
120,000
366,977
135,599
–
180,000
315,599
–
–
–
–
7,742
–
7,742
–
8,618
–
8,618
206,087
120,000
326,087
246,977
7,742
120,000
374,719
135,599
8,618
180,000
324,217
SG Thomas – Unapproved
5,217
–
–
5,217
–
5,217
All Directors total
929,105
140,000
(38,865)
1,013,880
16,360
1,030,240
112
Lok’nStore Group plc Annual Report and Accounts 2022Notes to the Financial Statements continuedFor the year ended 31 July 2022 The grant of options to Executive Directors and senior management is recommended by the Remuneration Committee
on the basis of their contribution to the Group’s success. The options vest after two and a half, three or five years,
subject to the performance criteria attached to the options.
Under the CSOP Approved Share Option scheme (note 25) and the Unapproved Share Options scheme (note 24(a)),
the exercise price of the options is equal to the closing mid-market price of the shares on the trading day previous to
the date of the grant. Exercise of an option is subject to continued employment or in the case of unapproved options
at the discretion of the Board. The life of each option granted is six and a half to seven years. There are no cash
settlement alternatives.
The rules governing the PPP scheme are disclosed in note 24b.
Under the CSOP Approved Share Option scheme (note 25) and the Unapproved Share Options scheme (note 24(a)),
the expected volatility is based on a historical review of share price movements over a period of time, prior to the
date of grant, commensurate with the expected term of each award. The expected term is assumed to be six and a
half years which is part way between vesting (two and a half to three years after grant) and lapse (ten years after grant).
The risk-free rate of return is the UK gilt rate at date of grant commensurate with the expected term (i.e., six and a
half years).
Under the Partnership Performance Plan (note 24(b)), the expected volatility is based on a historical review of share
price movements over a period of time, prior to the date of grant, commensurate with the expected term of each
award. For options granted on 31 July 2022, the expected term is assumed to be 10.34 years (2021 :11.76 years),
which is halfway between vesting and lapse. The vesting date is based upon the assumption that the CAD and/or
NAV targets are met at the same time as the share price target is met, and the lapse date is the fifteenth anniversary
of the grant. The risk-free rate of return is the UK gilt rate at date of grant commensurate with the expected term
(i.e.10.34 years).
The total charge for the year relating to employer share-based payment schemes was £201,385 (2021: £117,586),
all of which relates to equity-settled share-based payment transactions.
23 Enterprise Management Initiative Scheme
The Company operated a share option scheme under the Enterprise Management Initiative (EMI).
The Group has for some years no longer met the EMI Scheme qualifying criteria. Accordingly, there were no options
issued under this scheme during the year, and no options remained at the year-end. The scheme is now closed.
24a) Unapproved Share Options
The Company issues unapproved share options, the vesting conditions of which have been met.
Movements in the year are shown below:
Outstanding at 1 August
Granted during the year
Exercised during the year
Outstanding at 31 July
Exercisable at 31 July
Options
2022
Number
683,950
1,163
(280,323)
404,790
386,074
Weighted Average
Exercise Price
2022
Pence
188.16
1020.00
165.95
205.93
183.25
Options
2021
Number
715,104
8,608
(39,762)
683,950
663,093
Weighted Average
Exercise Price
2021
Pence
179.08
735.00
143.29
188.16
174.22
113
Strategic ReportOverviewEnvironmental and SocialGovernanceFinancial Statements 24a) Unapproved Share Options continued
The options outstanding at 31 July 2022 had a weighted average remaining contractual life of 2.5 years (2021: 2.8
years). The exercise prices for shares exercisable at 31 July 2022 ranged from 108.5 pence per share to 527.0 pence
per share.
The following sets out the movements in the year in respect of unapproved share options held by the Directors of
the Company.
As at
31 July 2021 Granted
Exercised
31 July 2022
As at
Exercise
Price
Pence
Date
from which
Exercisable
Expiry
Date
A Jacobs
R Davies
N Newman-
Shepherd
Total
206,087
246,977
135,599
588,663
–
–
–
–
(206,087)
–
1.085 – 2.855
31/7/15 – 6/8/18
31/7/22 – 6/8/25
(65,000)
181,977
0.850 – 2.135
31/7/10 – 31/7/17
31/7/17 – 31/7/27
–
135,599
1.360 – 3.875
31/7/16 – 31/7/20
31/7/18 – 31/7/27
(271,087)
317,576
24b) Unapproved Share Options – Partnership Performance Plan (PPP)
On 2 July 2018, the Group adopted the Company Partnership Performance Plan (PPP).
The Plan is a discretionary benefit offered by the Company for the benefit of selected key employees. Its main
purpose is to increase the interest of the employees in the Group’s long-term business goals and performance
through share ownership. Shares purchased or received under the Plan, any cash received under the Plan and
any gains obtained under the Plan are not part of salary for any purpose except to any extent required by statute.
The Remuneration Committee of the Board of the Company shall have the right to decide, in its sole discretion,
whether or not awards will be granted and to which employees those awards will be granted.
A summary of the structure and rules of the Plan are set out below:
Structure
• Options are granted on Lok’nStore Group plc shares.
• The exercise price is £6 per share, well above the market price at inception to allow the issuance of more options
increasing member returns if ambitious targets are hit.
• Options are to be issued to participants in five annual tranches from July 2018 to July 2022.
• Participants will have ten years to exercise from vesting dates.
• Performance criteria are geared to achievement of ambitious long-term plan.
• Performance targets of share price, NAV and CAD thresholds for each award. NAV and CAD thresholds to be
determined each year by the Remuneration Committee.
• Alternative exercise methods can be considered by the Group:
— Participants may exercise and hold or exercise and sell – paying tax arising
— Group delivers net profit to participants in cash or shares
114
Lok’nStore Group plc Annual Report and Accounts 2022Notes to the Financial Statements continuedFor the year ended 31 July 2022 Main Rules and Conditions
• Conditional on participants remaining in employment with the Group.
• All options vest if there is a change of control.
•
Includes Good/Bad Leaver clauses.
• The Scheme is entirely at the discretion of the Remuneration Committee who act on behalf of the Board.
Movements in the year are shown below:
Outstanding at 1 August 2021
Granted during the year
Lapsed during the year
Outstanding at 31 July 2022
Exercisable at 31 July 2022
Weighted
Average
Exercise Price
Pence
600.00
600.00
–
600.00
–
Options
Number
990,000
277,658
–
1,267,658
–
The following unapproved share options have been granted to Directors of the Company during the year.
As at
As at
Exercise
Price
31 July 2021
Granted
31 July 2022
A Jacobs
A Jacobs
A Jacobs
A Jacobs
A Jacobs
40,000
40,000
40,000
40,000
–
A Jacobs – Total
160,000
R Davies
R Davies
R Davies
R Davies
R Davies
R Davies – Total
N Newman-Shepherd
N Newman-Shepherd
N Newman-Shepherd
N Newman-Shepherd
40,000
40,000
40,000
40,000
–
160,000
60,000
60,000
60,000
60,000
–
–
–
–
40,000
40,000
–
–
–
–
38,236
38,236
–
–
–
–
N Newman-Shepherd
–
59,422
40,000
40,000
40,000
40,000
40,000
200,000
40,000
40,000
40,000
40,000
38,236
198,236
60,000
60,000
60,000
60,000
59,422
N Newman-Shepherd
– Total
240,000
59,422
299,422
Pence
600.00
600.00
600.00
600.00
600.00
600.00
600.00
600.00
600.00
600.00
600.00
600.00
600.00
600.00
600.00
Date from
which
Exercisable
Expiry
Date
Performance
Conditions
Met
31/07/2023
31/07/2033
31/07/2024
31/07/2034
31/07/2025
31/07/2035
31/07/2026
31/07/2036
31/07/2027
31/07/2037
31/07/2023
31/07/2033
31/07/2024
31/07/2034
31/07/2025
31/07/2035
31/07/2026
31/07/2036
31/07/2027
31/07/2037
31/07/2023
31/07/2033
31/07/2024
31/07/2034
31/07/2025
31/07/2035
31/07/2026
31/07/2036
31/07/2027
31/07/2037
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
115
Strategic ReportOverviewEnvironmental and SocialGovernanceFinancial Statements 25 CSOP Approved Share Options
On 2 June 2010, the Group adopted a Company Share Option Plan (CSOP). The CSOP achieved HMRC approval on
28 June 2010. There are no performance conditions attached to share options issued under CSOP.
Movements in the year are shown below:
Outstanding at 1 August
Granted during the year
Forfeited/surrendered during the year
Exercised during the year
Outstanding at 31 July
Exercisable at 31 July
Options
2022
Number
86,476
12,542
–
(36,435)
62,583
35,220
Weighted Average
Exercise Price
2022
Pence
Options
2021
Number
Weighted Average
Exercise Price
2021
Pence
372.48
1020.00
–
312.97
326.78
382.85
97,935
2,276
–
(13,735)
86,476
59,725
376.83
735.00
–
327.59
372.48
315.37
The options outstanding at 31 July 2022 had a weighted average remaining contractual life of 4.3 years (2021: 5.9 years).
The exercise prices for shares exercisable at 31 July 2022 ranged from 207.0 pence per share to 527.0 pence per
share. The inputs into the Black-Scholes model used to value the options granted during the year are as follows:
Date of Grant
31 July 2021
31 July 2022
Expected
Life
(Years)
Share Price
at Date
of Grant
(Pence)
Exercise
Price
(Pence)
Expected
Volatility
(%)
Expected
Dividend
Yield
(%)
5.90
4.30
735.00
735.00
1020.00
1020.00
34.05
35.10
1.81
1.54
Risk-Free
Interest Rate
(%)
0.38
1.71
Fair Value
Charge
per Award
(Pence)
199.00
322.00
The following CSOP approved share options have been granted to Directors of the Company. The expected price
volatility is based on the historical volatility (based on the remaining life of the options), adjusted for any expected
changes to future volatility due to publicly available information.
R Davies
N Newman-Shepherd
As at
31 July
2021
7,742
8,618
16,360
Granted
Exercised
2,941
964
3,905
(7,742)
(1,400)
(9,142)
As at
31 July
2022
2,941
8,182
11,123
Exercise
Price
(Pence)
Date from
which
Exercisable
10.20
10.20
31/7/25
31/7/25
Expiry
Date
31/7/32
31/7/32
116
Lok’nStore Group plc Annual Report and Accounts 2022Notes to the Financial Statements continuedFor the year ended 31 July 2022
26a) Other Reserves
Group
31 July 2020
Share-based remuneration (options)
IFRS 2 – transfer retained earnings
Tax charge relating to share options
Merger
Reserve
£’000
6,295
–
–
–
Other
Reserve
£’000
1,294
–
–
–
31 July 2021
6,295
1,294
Share-based remuneration (options)
IFRS 2 – transfer retained earnings
Tax charge relating to share options
–
–
–
–
–
–
31 July 2022
6,295
1,294
Capital
Redemption
Reserve
£’000
Share-based
Payment
Reserve
£’000
34
–
–
–
34
–
–
–
34
832
118
(26)
591
1,515
201
(180)
(57)
1,479
Total
£’000
8,455
118
(26)
591
9,138
201
(180)
(57)
9,102
The merger reserve represents the excess of the nominal value of the shares issued by Lok’nStore Group plc over
the nominal value of the share capital and share premium of Lok’nStore Limited as at 31 July 2001.
The other distributable reserve and the capital redemption reserve arose in the year ended 31 July 2004 from the
purchase of the Company’s own shares and a cancellation of share premium. The revaluation reserve is a non-cash
non-distributable reserve that reflects the uplift between market (fair) value of the Group’s store assets and their
historic book value.
Share-based Payment Reserve
There is the option to make transfers from the share-based payment reserve to retained earnings in respect of
accumulated share option charges where the options have either been exercised or have lapsed post-vesting.
The total amounts calculated and accordingly transferred to retained earnings amounted to £180,391 (2021: £26,419).
26b) Other Reserves
Company
31 July 2020
Share-based remuneration (options)
IFRS 2 – transfer to/from retained earnings
31 July 2021
Share-based remuneration (options)
IFRS 2 – transfer to/from retained earnings
31 July 2022
Other
Reserve
£’000
1,114
–
–
1,114
–
–
1,114
Share-based
Payment
Reserve
£’000
798
118
(26)
890
201
(180)
911
Total
£’000
1,912
118
(26)
2,004
201
(180)
2,025
117
Strategic ReportOverviewEnvironmental and SocialGovernanceFinancial Statements 27a) Retained Earnings
Group
31 July 2020
Profit attributable to owners of Parent for the financial year
Transfer from revaluation reserve
Additional depreciation on revaluation
Transfer from share-based payment reserve (note 26a)
Reserve transfer on disposal of assets
Dividend paid
31 July 2021
Profit attributable to owners of Parent for the financial year
Transfer from revaluation reserve
Additional depreciation on revaluation
Transfer from share-based payment reserve (note 26a)
Reserve transfer on disposal of assets
Dividend paid
31 July 2022
Retained Earnings
before Deduction
of Own Shares
£’000
26,595
3,283
568
26
165
(3,865)
26,772
12,078
821
180
20,258
(4,601)
55,508
Own Shares
(note 28)
£’000
(500)
–
–
–
–
–
(500)
–
–
–
–
–
(500)
Retained
Earnings
Total
£’000
26,095
3,283
568
26
165
(3,865)
26,272
12,078
821
180
20,258
(4,601)
55,008
The transfer from revaluation reserve represents the additional depreciation charged on revalued assets net of
deferred tax.
The Own Shares Reserve represents the cost of shares in Lok’nStore Group plc purchased in the market and held
in the Employee Benefit Trust to satisfy awards made under the Group’s share incentive plan and shares purchased
separately by Lok’nStore Limited for Treasury Account.
27b) Retained Earnings
Company
31 July 2020
Profit attributable to owners of Company for the financial year
Transfer from share-based payment reserve (note 25b)
Dividend paid
31 July 2021
Profit attributable to owners of Company for the financial year
Transfer from share-based payment reserve (note 25b)
Dividend paid
31 July 2022
Retained Earnings
before Deduction of
Own Shares
£’000
Own Shares
(note 28)
£’000
Retained
Earnings
Total
£’000
15,650
4,793
26
(3,865)
16,604
5,756
180
(4,601)
17,939
–
–
–
–
–
–
–
–
–
15,650
4,793
26
(3,865)
16,604
5,756
180
(4,601)
17,939
118
Lok’nStore Group plc Annual Report and Accounts 2022Notes to the Financial Statements continuedFor the year ended 31 July 2022
28 Own Shares
31 July 2021 and 31 July 2022
EBT
Shares
Number
623,212
EBT
Shares
£
499,910
Treasury
Shares
Number
–
Treasury
Shares
£
Own Shares
Total
£
–
499,910
The Group operates an Employee Benefit Trust (EBT) under a settlement dated 8 July 1999 between Lok’nStore
Limited and Lok’nStore Trustee Limited, constituting an employees’ share scheme.
Funds are placed in the Trust by way of deduction from employees’ salaries on a monthly basis as they so instruct
for purchase of shares in the Company. Shares are allocated to employees at the prevailing market price when the
salary deductions are made.
As at 31 July 2022, the Trust held 623,212 (2021: 623,212) Ordinary Shares of 1 pence each with a market value of
£6,356,762 (2021: £4,580,608). No shares were transferred out of the scheme during the year (2021: nil).
No options have been granted under the EBT. The EBT waived its dividends in full. No other dividends were waived
during the year.
29 Cash Flows
a) Reconciliation of Profit Before Tax to Cash Generated from Operations
Profit before tax
Depreciation and loss on disposal
Equity-settled share-based payments
Non-underlying items (note 4)
Interest receivable
Interest payable – bank borrowings
Interest payable – lease liabilities
Decrease / (increase) in financial asset
Decrease / (increase) in inventories
Decrease / (increase) in receivables
Increase / (decrease) in payables
Cash generated from operations
Year ended
31 July 2022
£’000
15,874
4,727
201
(5,739)
(42)
1,089
239
509
148
285
1,278
18,569
Year ended
31 July 2021
£’000
6,448
4,149
118
160
(1)
747
270
(148)
(20)
(645)
1,109
12,187
b) Reconciliation of Net Cash Flow to Movement in Net Bank Debt
Net bank debt is defined as non-current and current borrowings, as detailed in note 18 less cash and cash equivalents.
Increase / (decrease) in cash in the year
Change in net debt resulting from cash flows
Movement in net debt in year
Net bank debt brought forward
Net bank debt carried forward
Group
2022
£’000
37,360
(1,386)
35,974
(56,294)
(20,320)
Group
2021
£’000
(3,961)
(14,077)
(18,038)
(38,256)
(56,294)
119
Strategic ReportOverviewEnvironmental and SocialGovernanceFinancial Statements 30 Commitments Under Property Leases
At 31 July 2022 the total future minimum lease payments as a lessee under non-cancellable leases were as follows:
Land and Buildings
Amounts due:
Within one year
Between two and five years
After five years
Group
2022
£’000
1,727
4,737
6,273
12,737
Group
2021
£’000
1,612
4,583
6,863
13,058
Property lease payments represent rentals payable by the Group for certain of its properties. Typically, leases are
negotiated for a term of 20 years and rentals are fixed for an average of five years.
The Group’s property leases on its leased stores are recognised as a right of use asset and as a corresponding
liability at the year-end.
31 Related Party Transactions
The Company provides share options for the employees of Lok’nStore Limited. The capital contributions arising from
these share-based payments are separately disclosed under investments in note 13.
The aggregate remuneration of the Directors, and the other key management personnel of the Group, is set out
below. Further information on the remuneration of individual Directors is found in note 8.
Short-term employee benefits – Directors
Short-term employee benefits – Other key management
Post-employment benefits – Directors
Post-employment benefits – Other key management
Share-based payments
Social security costs – Directors
Social security costs – Other key management
Total
Group
2022
£’000
Group
2021
£’000
922
373
11
8
201
370
49
968
469
10
18
118
120
56
1,934
1,759
The Group recognises a number of management personnel that are important to retain within the business in order
for it to achieve its strategic plan. Accordingly, these are recognised as key personnel and are participants in the
Long-Term Performance Plan. They are included in the table above.
120
Lok’nStore Group plc Annual Report and Accounts 2022Notes to the Financial Statements continuedFor the year ended 31 July 2022 Group Director Shareholdings – Dividends Received
In respect of the total dividends paid during the year of £4.6 million (2021: £3.87 million), the Group Directors received
the amounts set out in the table below:
Director’s Dividend Income
Executive:
A Jacobs*
R Davies
N Newman-Shepherd
Non-Executive:
SG Thomas*
RJ Holmes
CP Peal
J Woyda
ETD Luker
Final 2021
10.67 pence
per Share
Interim 2022
5.0 pence
per Share
£
£
Holding
No.
Total
2022
£
Total
2021
£
5,513,950
588,338
275,698
73,832
30,739
1,691,190
289,606
600,629
2,419
–
7,878
3,280
180,450
30,901
64,087
258
–
3,692
1,537
84,560
14,480
30,031
121
–
864,036
11,570
4,817
265,010
45,381
94,118
379
–
658,776
8,400
4,098
203,733
41,004
84,797
105
4,666
8,202,365
875,192
410,119
1,285,311
1,005,579
*
Andrew Jacobs and Simon Thomas dividend income above includes their respective holdings in their individual pension funds.
Managed Stores – Group Director Shareholdings
The relationship between Lok’nStore Group plc and the Managed Stores which it manages have been reported in
detail in last year’s financial statements and is not repeated here.
Although the Director holdings in Managed Stores falls outside of the definition of related party transactions they are
disclosed here, as in previous years, for transparency and are set out in the table below:
Director
Andrew Jacobs
Charles Peal
Simon Thomas
Total shareholding
Issued Share Capital
% of Issued Share Capital
Wolverhampton
No. of Shares
Broadstairs
No. of Shares
Exeter
No. of Shares
36,800
38,160
–
–
36,800
189,341
19.4%
–
–
38,160
189,690
20.1%
240,000
500,000
160,000
900,000
3,970,000
22.7%
121
Strategic ReportOverviewEnvironmental and SocialGovernanceFinancial Statements 31 Related Party Transactions continued
Managed Stores – Group Director Shareholdings continued
• These shareholdings relate to three Managed Stores, each in separate corporate vehicles, which have very
specific EIS tax advantages. The Directors’ respective shareholdings in these companies have remained
unchanged since their initial investment.
• The Lok’nStore Directors have no other shareholdings in any other Managed Stores.
• Changes in UK Tax legislation mean that these EIS tax advantages no longer exist, and these reliefs are no
longer available for Managed Store opportunities that may be undertaken in the future.
• Under UK Takeover Panel protocols in relation to the Rule 9 Waiver agreed each year with Lok’nStore Group
plc, necessary to preserve the Group’s share buyback authority, Andrew Jacobs cannot, by agreement with
the Panel, purchase any more Lok’nStore shares. As such the three EIS investment vehicles represented an
opportunity for Mr Jacobs to hold additional self-storage assets in tax efficient vehicles.
• Lok’nStore Group operate 16 Managed Stores, currently trading, and have a further one secured Managed
Stores in the pipeline making a total of 17 Managed Stores. The Managed Store strategy is a well-developed
one which enables the Group to increase the operational footprint of Lok’nStore branded stores without the
balance sheet risk of ownership.
• At 31 July 2022, Lok’nStore has a total of 50 stores (40 currently trading and a pipeline of ten secured stores).
• The terms of the Management Services Agreements executed between Lok’nStore and with Wolverhampton,
Broadstairs and Exeter were executed at arm’s length on normal commercial terms with independent Director(s)
who were not directors of Lok’nStore and therefore unconnected. The commercial terms are all similar to, and
consistent with, those agreed with other third-party Managed Store owners.
• The Board of Lok’nStore Group plc have governance protocols in place to ensure that there are no conflicts
of interest between the Group and the shareholders of the Wolverhampton, Broadstairs and Exeter stores.
Specifically, Mr Jacobs could not hold a disproportionate holding in the EIS Managed Stores not commensurate
with his shareholding in Lok’nStore Group plc.
32 Capital Commitments
The Group has capital expenditure contracted but not provided for in the financial statements of £11.21 million
(2021: £6.16 million) relating to commitments to complete the ongoing construction of our sites in Bedford and
Peterborough and final contract commitments on our completed sites at Warrington and Stevenage. We are also
committed on the Staines Store project in respect of the land and main build contract and the Basildon Store in
respect of the lease commitment which commences when practical completion of the building is delivered to us at
the end of March 2023.
33 Guarantees
The Company has guaranteed the bank borrowings of Lok’nStore Limited, a subsidiary company. As at the year-end,
that company had gross bank borrowings of £66.8 million (2021: £65.4 million).
34 Events after the Reporting Date
Acquisition of a development site in Milton Keynes
On 4 October 2022, we exchanged contracts, subject to planning, on a freehold development opportunity in Watling
Street, Milton Keynes. This new highly visible roadside location in the north west of the city complements our existing
leasehold store, seven miles to the south east. Once developed the store will add circa 60,000 sq. ft. of lettable area.
122
Lok’nStore Group plc Annual Report and Accounts 2022Notes to the Financial Statements continuedFor the year ended 31 July 2022 Glossary
Abbreviation
APM
Alternative performance measure
Adjusted EBITDA
Earnings before all depreciation and amortisation charges, losses or profits on disposal, share-
based payments, acquisition costs, non-underlying items and non-recurring professional costs,
finance income, finance costs and taxation
Adjusted Store EBITDA
Adjusted EBITDA (see above) but before central and head office costs
AGM
Bps
CAD
Capex
CGU
CO2 e
CSOP
DRIP
EBT
EIS
(eKPIs)
EMI
ESOP
EU
GHG
HMRC
IAS
IFRIC
IFRS
ISA
JLL
KPI
LFL
LTPPP
LTV
MWh
NAV
NBV
Annual General Meeting
Basis Points
Cash available for Distribution
Capital Expenditure
Cash-generating units
Carbon Dioxide Equivalents
Company Share Option Plan
Dividend Reinvestment Plan
Employee Benefit Trust
Enterprise Investment Scheme
Environmental key performance indicators
Enterprise Management Incentive Scheme
Employee Share Option Plan
European Union
Greenhouse gas
His Majesty’s Revenue and Customs
International Accounting Standard
International Financial Reporting Interpretations Committee
International Financial Reporting Standards
International Standards on Auditing
Jones Lang LaSalle
Key Performance Indicator
Like for like
Long Term Partnership Performance Plan
Loan to Value Ratio
Megawatt Hour
Net Asset Value
Net Book Value
Operating Profit
Earnings before interest and tax (EBIT)
PPP
PV
QCA
RICS
RNS
ROU
SIP
SME
SONIA
Sq. ft.
tCO2e
TVR
VAT
Partnership Performance Plan
Photovoltaic
Quoted Companies Alliance
Royal Institution of Chartered Surveyors
Regulatory News Service
Right of Use Asset
Share Incentive Plan
Small and medium sized enterprises
Sterling Overnight Index Average
Square feet
Tonnes of carbon dioxide equivalent
Total voting rights
Value added tax
123
Strategic ReportOverviewEnvironmental and SocialGovernanceFinancial Statements Our Store Locations
Aldershot, Hampshire
Eastbourne, East Sussex
Altrincham, Cheshire
Exeter, Devon
Ashford, Kent
Barking, London
Basildon, Essex
Fareham, Hampshire
Farnborough, Hampshire
Gillingham, Kent
Basingstoke, Hampshire
Gloucester, Gloucestershire
Bedford, Bedfordshire
Harlow, Essex
Bolton, Lancashire
Hedge End, Southampton
Bournemouth, Dorset
Hemel Hempstead, Hertfordshire
Bristol, Gloucestershire
Horsham, West Sussex
Broadstairs, Kent
Ipswich, Suffolk
Cardiff, Glamorgan
Kettering, Northamptonshire
Cheshunt, Hertfordshire
Leicester, East Midlands
Chichester, West Sussex
Luton, Bedfordshire
Crawley, West Sussex
Maidenhead, Berkshire
Crayford, Kent
Dover, Kent
Milton Keynes, Buckinghamshire
Northampton Central,
Northamptonshire
Northampton Riverside,
Northamptonshire
Oldbury, West Midlands
Peterborough, Northamptonshire
Poole, Dorset
Portsmouth, Hampshire
Reading, Berkshire
Salford, Lancashire
Southampton, Hampshire
Staines, Surrey
Stevenage, Hertfordshire
Sunbury, Middlesex
Swindon, Wiltshire
Tonbridge, Kent
Warrington, Cheshire
Wellingborough, Northamptonshire
Wolverhampton, Staffordshire
Open Stores
Pipeline Stores
New Stores in Period
124
Lok’nStore Group plc Annual Report and Accounts 2022 Printed on paper made of material from well-managed, FSC®-certified forests
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Head Office
Lok’nStore Group plc
112 Hawley Lane
Farnborough
Hampshire
GU14 8JE
T. 01252 521010
www.loknstore.co.uk
www.loknstore.com